Question

The Manning Company has financial statements as shown next, which are representative of the company’s historical...

The Manning Company has financial statements as shown next, which are representative of the company’s historical average. The firm is expecting a 35 percent increase in sales next year, and management is concerned about the company’s need for external funds. The increase in sales is expected to be carried out without any expansion of fixed assets, but rather through more efficient asset utilization in the existing store. Among liabilities, only current liabilities vary directly with sales.

Income Statement
Sales $ 230,000
Expenses 168,500
Earnings before interest and taxes $ 61,500
Interest 9,500
Earnings before taxes $ 52,000
Taxes 17,500
Earnings after taxes $ 34,500
Dividends $ 13,800
Balance Sheet
Assets Liabilities and Stockholders' Equity
Cash $ 6,500 Accounts payable $ 22,800
Accounts receivable 42,000 Accrued wages 2,450
Inventory 55,000 Accrued taxes 4,650
Current assets $ 103,500 Current liabilities $ 29,900
Fixed assets 90,000 Notes payable 9,500
Long-term debt 27,500
Common stock 110,000
Retained earnings 16,600
Total assets $ 193,500 Total liabilities and stockholders' equity $ 193,500

Using the percent-of-sales method, determine whether the company has external financing needs, or a surplus of funds and how much.. (Hint: A profit margin and payout ratio must be found from the income statement.) (Do not round intermediate calculations.)
  

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