Consider the following information for the percentage of sales approach: Sales = $3M, NI = $0.4M,...

Consider the following information for the percentage of sales approach:

Sales = $3M, NI = $0.4M, Div = $0.1M

Total Asset = $4M

Current Liability $0.2M

Long-term debt = $1M

Equity = $2.8M

If sales increase by 25% (and NI, assets, and CL increase at the same rate), calculate the external financing needed.

0.575

0.400

0.437

0.485

0.521

Solutions

Expert Solution

In percentage of sales approach, net income will also increase by the same rate as sales.

Dividend paid will also increase at the same rate as sales

Firstly, we need to calculate the amount that will be added to the retained earnings in the forecase period by deducting dividend paid from net income.

Then, we can add the amount calculated above to equity.

Assets and Current liabliity also increase at the same rate as sales.

We know that the assets and Liabilities+Equity should be equal. So, the difference between the Total assets and Liabilities+Equity will be the external financing needed. We n

Calculation is as follows:

Formulas:

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Question 3 A. J & B Company uses the percentage of sales approach to estimate its...

Question 3 A. J & B Company uses the percentage of sales approach to estimate its uncollectible accounts. The company’s annual sales for its first financial year of operations ending July 31, 2020 was $500,000, cash sales contributed to 2% of the overall sales and the accounts receivable balance at year end was $75,000. Based on industry expectations, it estimated that 3% of its credit sales would be uncollectible. Required: a. Calculate the bad debt expense at July 31, 2020....

A. J & B Company uses the percentage of sales approach to estimate its uncollectible accounts....

A. J & B Company uses the percentage of sales approach to estimate its uncollectible accounts. The company’s annual sales for its first financial year of operations ending July 31, 2020 was $500,000, cash sales contributed to 2% of the overall sales and the accounts receivable balance at year end was $75,000. Based on industry expectations, it estimated that 3% of its credit sales would be uncollectible. Required: Show all workings a. Calculate the bad debt expense at July 31,...

What is the percentage of sales approach? How do you adjust the model when operating at...

What is the percentage of sales approach? How do you adjust the model when operating at less than full capacity?

And then an advantage and disadvantage of each approach. GNP and NI in the United States...

And then an advantage and disadvantage of each approach. GNP and NI in the United States Next though is how does the US government HELP creat GNP and NI. And then how can the US government HURT GDP and NI. As such how do YOU THINK we can define the governmental role most suitable for creating and sustaining a good, health, GDP and NI.

Consider a galvanic cell that consists of a Ni^2+/Ni half-cell and a standar hydrogen electrode. The...

Consider a galvanic cell that consists of a Ni^2+/Ni half-cell and a standar hydrogen electrode. The concentration of Ni^2+ is 0.1M, the pressure of H2 is 1atm and the concentration of H+ is 0.05M. A. write a balanced reaction for the cell. B. what is the oxidizing and reducing agent? C. Calculate the Eo cell D. Calculate the Ecell E. Is the reaction spontaneous under these conditions?

Use the following information to answer questions 44-46 using the sales comparison approach. A comparable property...

Use the following information to answer questions 44-46 using the sales comparison approach. A comparable property sold 7 months ago for $231,200. The adjustments for the various elements of comparison have been calculated as follows: Location: +4.5 % Market conditions: -0.54% per month Physical characteristics: + $4,500 Financing terms: -$3,500 Nonrealty items: +$5,200 Conditions of sale, Legal characteristics, Use: 0 What is the value of the market conditions adjustment?* None of the above -$14,800 -$8,600 -$1,200 6 points Question 45...

Consider the following half reactions at 298 K Ni2+ + 2 e- → Ni Eo =...

Consider the following half reactions at 298 K Ni2+ + 2 e- → Ni Eo = -0.231 V Pb2+ + 2 e- → Pb Eo = -0.133 V A galvanice cell based on these half reactions is set up under standard conditions where each solution is 1.00 L and each electrode weighs exactly 100.0 g. How much will the Pb electrode weigh when the nonstandard potential of the cell is 0.09296 V?

The following information is available on the percentage rates of return on various assets for the...

The following information is available on the percentage rates of return on various assets for the last three years. You determine that this is a sample which is representative of the data population for these securities. Security Year 1 Security Year 1 Year 2 Year 3 Stock A 6% 18% 60% Stock B 32% 22% 32% Market 50% 12% 20% Government Bonds 10% 10% 10% (a) Consider only shares A and B for this part. Compute the portfolio weights that...

Given the following information, what is the percentage change in the price of the bonds if...

Given the following information, what is the percentage change in the price of the bonds if interest rates suddenly rise by 2%? (Please show your work as I am attempting to work out similar problems in excel.) Wing Air Inc. Coupon rate 7% Settlement date 1/1/2000 Maturity date 1/1/2002 Face value 1,000 # of coupons per year 2 Airfoil, Inc. Coupon rate 7% Settlement date 1/1/2000 Maturity date 1/1/2015 Face value 1,000 # of coupons per year 2 Change in...

Uncollectible Accounts—Percentage of Sales and Percentage of Receivables At the end of the current year, the...

Uncollectible Accounts—Percentage of Sales and Percentage of Receivables At the end of the current year, the accounts receivable account of Glenn's Nursery Supplies has a debit balance of $390,000. Credit sales are $2,780,000. Record the end-of-period adjusting entry on December 31, in general journal form, for the estimated uncollectible accounts. Assume the following independent conditions existed prior to the adjustment: 1. Allowance for Doubtful Accounts has a credit balance of $1,860. a. The percentage of sales method is used and...

Subjects