Question

Maggie's Muffins Bakery generated $4 million in sales during 2019, and its year-end total assets were...

Maggie's Muffins Bakery generated $4 million in sales during 2019, and its year-end total assets were $2 million. Also, at year-end 2019, current liabilities were $1 million, consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,000 of accruals. Looking ahead to 2020, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 6%, and its payout ratio will be 45%. How large a sales increase can the company achieve without having to raise funds externally—that is, what is its self-supporting growth rate? Do not round intermediate calculations. Enter your answer for sales increase in dollars. For example, an answer of $2 million should be entered as 2,000,000.Round the monetary value to the nearest dollar and percentage value to one decimal place.

Homework Answers

Answer #1

Here

Current sales = $4,000,000

Current total assets = $2,000,000

Profit margin = 6% = 0.06

Payout ratio = 45% = 0.45

Accounts payable = $500,000

Notes payable = $300,000

Accruals = $200,000

Current Spontaneous Liabilities = Accounts Payable + Accruals

   = $500,000 + $200,000

    = $700,000

Retention Ratio = 1 - Payout Ratio

       = 1 - 0.45

       = 0.55

Self-supporting Growth Rate = [Profit margin × Retention Ratio × Current Sales] ÷ [Current Total Assets - Current Spontaneous Liabilities - (Profit margin × Retention Ratio × Current Sales)]

= [0.06 × 0.55 × $4,000,000] ÷ [$2,000,000 - $700,000 - (0.06 × 0.55 × $4,000,000)]

= $132,000 ÷ [1,300,000 – (132,000)]

= $132,000 ÷ $1,168,000

= 0.11301

= 11.30%

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Maggie's Muffins Bakery generated $6 million in sales during 2018, and its year-end total assets were...
Maggie's Muffins Bakery generated $6 million in sales during 2018, and its year-end total assets were $3 million. Also, at year-end 2018, current liabilities were $1 million, consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,000 of accruals. Looking ahead to 2019, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 5%, and its payout ratio...
Maggie's Muffins Bakery generated $2 million in sales during 2018, and its year-end total assets were...
Maggie's Muffins Bakery generated $2 million in sales during 2018, and its year-end total assets were $1 million. Also, at year-end 2018, current liabilities were $1 million, consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,000 of accruals. Looking ahead to 2019, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 7%, and its payout ratio...
Maggie's Muffins Bakery generated $4 million in sales during 2018, and its year-end total assets were...
Maggie's Muffins Bakery generated $4 million in sales during 2018, and its year-end total assets were $2.4 million. Also, at year-end 2018, current liabilities were $1 million, consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,000 of accruals. Looking ahead to 2019, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 4%, and its payout ratio...
Self-Supporting Growth Rate Maggie's Muffins Bakery generated $4 million in sales during 2019, and its year-end...
Self-Supporting Growth Rate Maggie's Muffins Bakery generated $4 million in sales during 2019, and its year-end total assets were $2.2 million. Also, at year-end 2019, current liabilities were $1 million, consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,000 of accruals. Looking ahead to 2020, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 7%, and...
Maggie's Muffins Bakery generated $2,000,000 in sales during 2016, and its year-end total assets were $1,700,000....
Maggie's Muffins Bakery generated $2,000,000 in sales during 2016, and its year-end total assets were $1,700,000. Also, at year-end 2016, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,000 of accruals. Looking ahead to 2017, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 5%, and its payout ratio will be 40%....
Maggie's Muffins Bakery generated $4,000,000 in sales during 2016, and its year-end total assets were $2,800,000....
Maggie's Muffins Bakery generated $4,000,000 in sales during 2016, and its year-end total assets were $2,800,000. Also, at year-end 2016, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,000 of accruals. Looking ahead to 2017, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 6%, and its payout ratio will be 70%....
Maggie's Muffins, Inc., generated $2,000,000 in sales during 2015, and its year-end total assets were $1,500,000....
Maggie's Muffins, Inc., generated $2,000,000 in sales during 2015, and its year-end total assets were $1,500,000. Also, at year-end 2015, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,000 of accruals. Looking ahead to 2016, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 7%, and its payout ratio will be 70%....
Maggie's Muffins, Inc., generated $2,000,000 in sales during 2015, and its year-end total assets were $1,300,000....
Maggie's Muffins, Inc., generated $2,000,000 in sales during 2015, and its year-end total assets were $1,300,000. Also, at year-end 2015, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,000 of accruals. Looking ahead to 2016, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 4%, and its payout ratio will be 50%....
Maggie's Muffins, Inc., generated $2,000,000 in sales during 2015, and its year-end total assets were $1,600,000....
Maggie's Muffins, Inc., generated $2,000,000 in sales during 2015, and its year-end total assets were $1,600,000. Also, at year-end 2015, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,000 of accruals. Looking ahead to 2016, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 5%, and its payout ratio will be 50%....
Maggie’s Muffins Bakery generated $5,000,000 in sales during 2016, and its year-end total assets were $2,500,000....
Maggie’s Muffins Bakery generated $5,000,000 in sales during 2016, and its year-end total assets were $2,500,000. Also, at year-end 2016, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,000 of accruals. Looking ahead to 2017, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 7%, and its payout ratio will be 80%....