The Manning Company has financial statements as shown below, which are representative of the company’s historical average. The firm is expecting a 20 percent increase in sales next year, and management is concerned about the company’s need for external funds. The increase is sale 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. Using the percent-of-sales method, determine whether the company has external financing needs, or a surplus of funds.
Income Statement
Sales $200,000
Expenses 158,000
Earnings before interest and taxes $42,000
Interest 7,000
Earnings before taxes $35,000
Taxes $15,000
Earnings after taxes $20,000
Dividends $6,000
Balance Sheet
Assets
Cash $5,000
Accounts receivable 40,000
Inventory 75,000
Current assets $120,000
Fixed assets 80,000
Total assets 200,000
Liabilities and Stockholders’ Equity
Accounts payable 25,000
Accrued wages 1,000
Accrued taxes 2,000
Current liabilities 28,000
Notes payable 7,000
Long-term debt 15,000
Common Stock 120,000
Retained earnings 30,000
Total liabilities and stockholders’ equity 200,000
