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The Manning Company has financial statements as shown next, which are representative of the company's historical average. The firm is expecting a 35 percent
The Manning Company has financial statements as shown next, which are representative of the company's historical average. The firm is expecting a 35 percent increase in sales next year, and management is concerned about the company's need for external funds. The increase in sales is expected to be carried out without any expansion of fixed assets, but rather through more efficient asset utilization in the existing store. Among liabilities, only current liabilities vary directly with sales. Income Statement Sales Expenses Earnings before interest and taxes Interest Earnings before taxes Taxes Earnings after taxes Dividends $200,000 155,800 $ 44,200 8,100 $ 36,100 16,100 $ 20,000 $ 7,000 Balance Sheet Assets Liabilities and Stockholders' Equity Cash $ 5,000 Accounts payable Accounts receivable Inventory 35,000 60,000 Accrued wages Accrued taxes $ 20,000 1,750 4,250 Current assets Fixed assets $100,000 91,000 Current liabilities $ 26,000 Notes payable 8,100 Long-term debt 20,500 Common stock 115,000 Retained earnings 21,400 $191,000 Total assets Total liabilities and stockholders' equity $191,000 Using the percent-of-sales method, determine whether the company has external financing needs, or a surplus of funds. (Hint: A profit margin and payout ratio must be found from the income statement.) (Do not round intermediate calculations.) The firm
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