External Financing Needed
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Tobin Supplies Company expects sales next year to be $500,000. Inventory and accounts receivable will increase $90,000 to accommodate this sales level. The company has a steady profit margin of 12 percent with a 40 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.
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Solution Summary
The solution explains how to calculate the amount of external financing needed given the increase in sales
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External financing needed = Increase in assets - increase in spontaneous liabilities - retained ...
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