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The Manning Company has financial statement as shown next, which are representative of the company’s historical average, The firm is expecting a 35 percent increase in sales next year, and management is concerned about the company’s need for external funds.

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The increase in sales is expected to be carried out without any expansion of fixed assets, but rather through more efficient asset utilization on the existing store. Among liabilities, only current liabilities vary directly with sales. Using the percent of sales method determines whether the company has external financing needs or a surplus of funds. (Hint: A profit margin and payout ratio must be found from the income statement.)

Income statement

Sales $250,000

Expenses 192,000

Earnings before interest and taxes 58,000

Interest 7,500

Earnings before taxes 50,500

Taxes 15,500

Earning after taxes 35,000

Dividends 7,000

Balance Sheet Assets Liabilities and Stockholders equity

Cash $ 8,500 Account payable $ 26,400

Account receivable 63,000 Accrued wages 2,350

Inventory 91,000 Accrued taxes 3,750

Current assets 162,500 Current Liabilities 32,500

Fixed assets 85,000 Notes payable 7,500

Long-term debt   17,500

Common stock 125,000

Retained earnings 15,000

Total liabilities and

stockholder’s equity 247,500. Get Finance homework help today

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