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    External Financing - Cobb Tie Shops, Inc., expects sales next year to be $300,000

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    Cobb Tie Shops, Inc., expects sales next year to be $300,000. Inventory and accounts receivable will increase $60,000 to accommodate this sales level. The company has a steady profit margin of 10 percent with a 30 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.

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    Solution Preview

    Sales= $300,000
    Profit @ 10%= $30,000
    Dividend paid @ 30 %= $9,000 ...

    Solution Summary

    This solution calculates external financing required, given an increase in assets and liabilities to support an increase in sales.