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Given the following information: Case 1 2 Cost of Goods Sold 60% of sales 70% of sales Selling, General, and Administrative Expense 20% of sales

Given the following information:

Case 1 2
Cost of Goods Sold 60% of sales 70% of sales
Selling, General, and Administrative Expense 20% of sales 12% of sales
Net Profit 5% of sales 7% of sales
Dividends 40% of net profit 20% of net profit
Cash 2% of sales 3% of sales
Accounts Receivable 8% of sales 6% of sales
Inventory 15% of C.O.G.S. 10% of C.O.G.S.
Accounts Payable 7% of sales 10% of sales
Accrued Expenses 4% of sales 6% of sales

In which case(s) would an increase in the sales growth rate increase external financing required?

  • A.

    1 only

  • B.

    2 only

  • C.

    1 and 2

  • D.

    neither 1 nor 2

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