7)

The Manning Company has financial statements as shown next, which are representative of the companys historical average.

The firm is expecting a 35 percent increase in sales next year, and management is concerned about the companys 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		177,500
Earnings before interest and taxes	$	52,500
Interest		7,300
Earnings before taxes	$	45,200
Taxes		15,300
Earnings after taxes	$	29,900
Dividends	$	11,960

Balance Sheet
Assets	Liabilities and Stockholders' Equity
Cash	$	6,500	Accounts payable	$	28,200
Accounts receivable		50,000	Accrued wages		2,650
Inventory		70,000	Accrued taxes		3,650
Current assets	$	126,500	Current liabilities	$	34,500
Fixed assets	83,000	Notes payable	7,300
	Long-term debt	16,500
			Common stock		123,000
		Retained earnings	28,200
Total assets	$	209,500	Total liabilities and stockholders' equity	$	209,500

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. Input the amount as a positive value.)

The firm

(Click to select)hasneeds

$in

(Click to select)external fundssurplus funds

.