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.© BrainMass Inc. brainmass.com March 6, 2023, 12:47 pm ad1c9bdddf
Profit @ 10%= $30,000
Dividend paid @ 30 %= $9,000 ...
This solution calculates external financing required, given an increase in assets and liabilities to support an increase in sales.