Reference no: EM132484212
The Manning Company has financial statements as shown next, which are representative of the company's historical average. The firm is expecting a 30 percent increase in sales next year, and management is concerned about the company's need for external funds. The increase in sales is expected to be carried out without any expansion of fixed assets, but rather through more efficient asset utilization in the existing store. Among liabilities, only current liabilities vary directly with sales.
Income Statement
Sales $230,000
Expenses 175,300
Earnings before interest and taxes$54,700
Interest 8,400
Earnings before taxes$46,300
Taxes 16,400
Earnings after taxes$29,900
Dividends$11,960
Balance Sheet
Assets Liabilities and Stockholders' Equity
Cash $9,500 Accounts payable$26,900
Accounts receivable 47,000 Accrued wages 1,900
Inventory 70,000 Accrued taxes 3,400
Current assets$126,500 Current liabilities$32,200
Fixed assets 94,000 Notes payable 8,400
Long-term debt 22,000
Common stock 118,000
Retained earnings 39,900
Total assets$220,500 Total liabilities and stockholders' equity$220,500
Using the percent-of-sales method, determine 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.) (Do not round intermediate calculations.)