Problem 4-29 Percent-of-sales method [LO4-3] Conn Man's Shops, a national clothing chain, had sales of $390 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 next. Balance Sheet End of Year (in $ millions) Assets Cash $ 39 Accounts receivable 34 Liabilities and Stockholders' Equity Accounts payable Accrued expenses $ 51 37 Inventory Plant and equipment 80 198 Common stock Other payables 68 78 Retained earnings 117 $ 351 Total assets Total liabilities and stockholders' equity $ 351 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.