The Landis Corporation had 2008 Sales of 100 millions.
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The Landis Corporation had 2008 Sales of 100 millions. The balance sheet item that vary directly with sales and the profit margin are as follows :
Cash 5%
Accounts receivable 15%
Inventory 25%
Net Fix Assets 40%
Accounts Payable 15%
Accruals 10%
Profit Margin after taxes 6%
The dividend pay out rate is 50% of earning and the balance in retain earning at the end of 2008 was 33 millions. Common stock and company's long term bond are constant at 10 millions and 5 millions respectively. Notes payable are currently 12 millions.
A. How much additional external capital will be required for next year if sales increase 15% ? (Assume that the company is already operating at full capacity.
B. What will happen to external fund requirement if landed corporation reduces the payout ratio grows at a slower rate or suffers decline in its profit margin? Discuss each of this separately.
C. Prepare a Performa balance sheet 2009 assuming that any external fund been acquired will be in the form of notes payable. Disregard the information in answering the question that is use the original information and part 15 in constructing your Performa in balance sheet
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The solution examines Landis Corporation sales and profit margins.
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