Explore BrainMass

Explore BrainMass

    Additional Funds Needed

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Galehouse Gas Stations, Inc. expects sales to increase from $1,500,000 to $1,700,000 next year. Mr. Galehouse believes that net assets (assets - liabilities) will represent 70% of sales. His firm has a 10% return on sales and pays 40% of profits out as dividends.

    1. What effect will this growth have on funds?
    2. If the dividend payout is only 15%, what effect will this growth have on funds?

    © BrainMass Inc. brainmass.com June 4, 2020, 2:05 am ad1c9bdddf
    https://brainmass.com/business/accounting/additional-funds-needed-437518

    Solution Preview

    Galehouse Gas Stations, Inc. expects sales to increase from $1,500,000 to $1,700,000 next year. Mr. Galehouse believes that net assets (assets - liabilities) will represent 70% of sales. His firm has a 10% return on sales and pays 40% of profits out as dividends.

    1. What effect will this growth have on funds?

    Assuming that all ...

    Solution Summary

    This solution illustrates how to compute the additional funds needed under different circumstances.

    $2.19

    ADVERTISEMENT