Question

# 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%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Open spreadsheet 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. Round your answers to the nearest whole number. Sales can increase by \$ , that is by %.

#### Homework Answers

Answer #1

Given,

Sales = \$ 2000000

Total assets = \$ 1600000

Accounts payable = \$ 500000

Accruals = \$ 200000

Spontaneous liabilities = accounts payable + accruals

= \$ 500000 + \$ 200000 = \$ 700000

Profit margin = 5% or 0.05

Payout ratio = 50% or 0.50

Solution :-

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