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The Manning Company has financial statements as shown next,which are representative of the company’s historical...

The Manning Company has financial statements as shown next, which are representative of the company’s historical average. The firm is expecting a 30 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$280,000
Expenses
222,800
Earnings before interest and taxes$57,200
Interest
7,800
Earnings before taxes$49,400
Taxes
15,800
Earnings after taxes$33,600
Dividends$6,720

Balance Sheet
AssetsLiabilities and Stockholders' Equity
Cash$5,000Accounts payable$22,100
Accounts receivable
86,000Accrued wages
1,600
Inventory
77,000Accrued taxes
4,300
Current assets$168,000Current liabilities$28,000
Fixed assets
88,000Notes payable
7,800



Long-term debt
19,000



Common stock
128,000



Retained earnings
73,200
Total assets$256,000Total liabilities and stockholders' equity$256,000

  

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.)
  

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