Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 4 - 2 9 ( Algo ) Percent - of - sales method [ LO 4 - 3 ] Conn Man's Shops, a national

Problem 4-29(Algo) Percent-of-sales method [LO4-3]
Conn Man's Shops, a national clothing chain, had sales of $340 million last year. The business has a steady net profit margin of 8
percent and a dividend payout ratio of 35 percent. The balance sheet for the end of last year is shown.
The firm's marketing staff has told the president that in the coming year there will be a large increase in the demand for overcoats and
wool slacks. A sales increase of 10 percent is forecast for the company.
All balance sheet items are expected to maintain the same percent-of-sales relationships as last year,* except for common stock and
retained earnings. No change is scheduled in the number of common stock shares outstanding, and retained earnings will change as
dictated by the profits and dividend policy of the firm. (Remember, the net profit margin is 8 percent.)
*This includes fixed assets, since the firm is at full capacity.
a. Will external financing be required for the company during the coming year?
No
Yes
b. What would be the need for external financing if the net profit margin went up to 9.50 percent and the dividend payout ratio was
increased to 65 percent?
Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in
dollars, not millions, (e.g., $1,234,567). Input your answer as positive a value.
Required new funds
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Introductory Econometrics For Finance

Authors: Chris Brooks

2nd Edition

052169468X, 9780521694681

More Books

Students also viewed these Finance questions