HomeworkLib
Question

Antivirus Inc. expects its sales next year to be $2,600,000. Inventory and accounts receivable will increase...

Antivirus Inc. expects its sales next year to be $2,600,000. Inventory and accounts receivable will increase by $490,000 to accommodate this sales level. The company has a steady profit margin of 20 percent with a 40 percent dividend payout.
How much external financing will the firm have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing.
business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Net income = Sales * Profit margin = $2,600,000 * 0.20 = $520,000

Increase in retained earnings = Net income - Dividends = $520,000 - ($520,000 * 0.40) = $312,000

External funds needed = Increase in assets - Increase in retained earnings

External funds needed = $490,000 - $312,000

External funds needed = $178,000

0 0
Add a comment
Know the answer?
Add Answer to:
Antivirus Inc. expects its sales next year to be $2,600,000. Inventory and accounts receivable will increase...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Tobin Supplies Company expects sales next year to be $450,000. Inventory and accounts receivable will increase...

    Tobin Supplies Company expects sales next year to be $450,000. Inventory and accounts receivable will increase $90,000 to accommodate this sales level. The company has a steady profit margin of 10 percent with a 25 percent dividend payout. How much external financing will Tobin Supplies Company have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing.

  • Tobin Supplies Company expects sales next year to be $540,000. Inventory and accounts receivable will increase...

    Tobin Supplies Company expects sales next year to be $540,000. Inventory and accounts receivable will increase $100,000 to accommodate this sales level. The company has a steady profit margin of 30 percent with a 50 percent dividend payout How much external financing will Tobin Supplies Company have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing. External funds needed

  • Tobin Supplies Company expects sales next year to be $440,000. Inventory and accounts receivable will increase $85,000 t...

    Tobin Supplies Company expects sales next year to be $440,000. Inventory and accounts receivable will increase $85,000 to accommodate this sales level. The company has a steady profit margin of 30 percent with a 45 percent dividend payout.    How much external financing will Tobin Supplies Company have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing. External funds needed =

  • Tobin Supplies Company expects sales next year to be $520,000. Inventory and accounts receivable will increase...

    Tobin Supplies Company expects sales next year to be $520,000. Inventory and accounts receivable will increase $90,000 to accommodate this sales level. The company has a steady profit margin of 20 percent with a 30 percent dividend payout. How much external financing will Tobin Supplies Company have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing. Please show steps. No handwritten/photo explanations. Thank you.

  • Bondage Supply Company expects sales next year to be $310.000. Inventory and accounts receivable will have...

    Bondage Supply Company expects sales next year to be $310.000. Inventory and accounts receivable will have to be increased by $65,000 to accommodate this sales level. The company has a steady profit margin of 15 percent, with a 10 percent dividend payout How much external funding will Bondage Supply Company have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing External funds needed $

  • Bondage Supply Company expects sales next year to be $310,000 Inventory and accounts receivable will have...

    Bondage Supply Company expects sales next year to be $310,000 Inventory and accounts receivable will have to be increased by $65,000 to accommodate this sales level The company has a steady profit margin of 15 percent, with a 10 percent dividend payout How much external funding will Bondage Supply Company have to seek? Assume there is no increase in liabilities other than that which will occur with the external linancing External funds needed $

  • Galehouse Gas Stations Inc. expects sales to increase from $1,700,000 to $1,900,000 next year. Galehouse believes...

    Galehouse Gas Stations Inc. expects sales to increase from $1,700,000 to $1,900,000 next year. Galehouse believes that net assets (Assets – Liabilities) will represent 70 percent of sales. His firm has an 12 percent return on sales and pays 40 percent of profits out as dividends. a. What effect will this growth have on funds? The cash balance will b. If the dividend payout is only 20 percent, what effect will this growth have on funds? The cash balance will...

  • Galehouse Gas Stations Inc. expects sales to increase from $1,510,000 to $1,710,000 next year. Galehouse believes...

    Galehouse Gas Stations Inc. expects sales to increase from $1,510,000 to $1,710,000 next year. Galehouse believes that net assets (Assets - Liabilities) will represent 30 percent of sales. His firm has an 8 percent return on sales and pays 45 percent of profits out as dividends. a. What effect will this growth have on funds? The cash balance will 1 increase by decrease by b. If the dividend payout is only 30 percent, what effect will this growth have on...

  • Galehouse Gas Stations Inc. expects sales to increase from $1,520,000 to $1,720,000 next year. Galehouse believes...

    Galehouse Gas Stations Inc. expects sales to increase from $1,520,000 to $1,720,000 next year. Galehouse believes that net assets (Assets - Liabilities) will represent 35 percent of sales. His firm has an 9 percent return on sales and pays 50 percent of profits out as dividends. a. What effect will this growth have on funds? The cash balance will b. If the dividend payout is only 35 percent, what effect will this growth have on funds? The cash balance will

  • The most recent financial statements for ABC Inc., follow. Sales for next year are projected to...

    The most recent financial statements for ABC Inc., follow. Sales for next year are projected to grow by 20 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets and accounts payable increase spontaneously with sales. ABC, INC. Income Statement Sales $ 582,391 Costs 508,983 Other expenses 19,721 Earnings before interest and taxes $ ? Interest paid 12,109 Taxable income $ ? Taxes (30%) ?...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT