What would happen to additional capital requirement

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Question - The 2020 sales of Pinansing Company amounted to P4 million. The dividend payout ratio is 20%. The percent of sales in each balance sheet item that varies directly with sales are expected to be as follows:

Current assets 30%

Net fixed assets 45%

Accounts payable & accrued expenses 25%

Net profit rate 15%

Requirements -

1. Suppose that in 2021 sales are expected to increase by 25% percent over 2020 sales. How much additional (external) capital will be required?

2. What would happen to capital requirements if Alas can increase its sales by 50% and the payout ratio is maintained.

3. What would happen to additional capital requirement if the payout ratio is raised to 40% and there was an increase in sales by 25%?

4. Compute the sustainable growth rate.

Reference no: EM132938655

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