Question
Spring Company reported sales of $127,650 in 2022 and earnings after tax of $19,148 . Its December 31st, 2022, condensed balance sheet is presented below:
Spring Company reported sales of $127,650 in 2022 and earnings after tax of $19,148 . Its December 31st, 2022, condensed balance sheet is presented below: | |||||||||||
Current assets | 90,000 | Current liabilities | 55,000 | ||||||||
Plant and equipment, net | 100,000 | Long-term liabilities | 35,000 | ||||||||
Common shares | 40,000 | ||||||||||
Retained earnings | 60,000 | ||||||||||
Total assets | 190,000 | Total liabilities and equity | 190,000 | ||||||||
The company always maintains a dividend payout ratio of 40%. Based on predicted economic conditions it expects next years sales volume to increase by 13.0% and its profit margin to remain the same as in 2022. | |||||||||||
A. Use the "Percentage of sales" method to determining the external financing required assuming the company has sufficient plant capacity
to handle the increase in sales volume
Increase In RE=
RNF=
B. Assume that company do not have excess capacity and would require a similar percentage increase in net plant and equipment to accomodate the net increase in volume. Calculate external financing required.
RNF=
C.
C. Assume instead that the company does not have excess capacity and would require a $10,000 increase in net plant and equipment to accommodate the volume increase. Compute the external financing required. RNF= |
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