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Savod Help Save Harvard Prep Shops, a national clothing chain, had sales of $300 million last year. The business has a steady net profit margin
Savod Help Save Harvard Prep Shops, a national clothing chain, had sales of $300 million last year. The business has a steady net profit margin of 30 percent and a dividend payout ratio of 30 percent. The balance sheet for the end of last year is shown below: Assets Cash Account receivable Inventory Balance Sheet December 31, 20xx ($ millions) Liabilities and Shareholders' Equity $5 Accounts payable 24 Accrued expenses 69 other payables Common stock 160 Retained earnings $258 Total liabilities and equity $16 12 14 40 176 Plant and equipment Total assets $258 Harvard's anticipates a large increase in the demand for tweed sport coats and deck shoes. A sales increase of 30 percent is forecast 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 in the number of common shares outstanding is scheduled, and retained earnings will change as dictated by the profits and dividend policy of the firm. a. Will external financing be required for the Prep Shop during the coming year? Yes NO
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