Reference no: EM131302410

Percent-of-sales method [LO3] The Manning Company has financial statements as shown next, which are representative of the company’s historical average. The firm is expecting a 25 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 $ 220,000 Expenses 171,200 Earnings before interest and taxes $ 48,800 Interest 7,200 Earnings before taxes $ 41,600 Taxes 15,200 Earnings after taxes $ 26,400 Dividends $ 9,240 Balance Sheet Assets Liabilities and Stockholders' Equity Cash $ 8,000 Accounts payable $ 29,000 Accounts receivable 61,000 Accrued wages 2,600 Inventory 85,000 Accrued taxes 3,600 Current assets $ 154,000 Current liabilities $ 35,200 Fixed assets 82,000 Notes payable 7,200 Long-term debt 16,000 Common stock 122,000 Retained earnings 55,600 Total assets $ 236,000 Total liabilities and stockholders' equity $ 236,000 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. Input the amount as a positive value.) The firm $ in . References WorksheetProblem 4-28 Percent-of-sales method [LO3] ©2016 McGraw-Hill Education. All rights reserved.