Hungry Howie's is currently operating at full capacity. The profit margin and the dividend payout ratio are held constant. Net working capital and fixed assets vary directly with sales. Sales are projected to increase by 11 percent. What is the external financing needed?

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Quizplus · Accepted Answer

Projected total assets = $14,500 F1F1F1S1F1F1F10 1.11 = $16,095Projected accounts payable = $1,920 F1F1F1S1F1F1F10 1.11 = $2,131.20Projected retained earnings = $1,580 + ($1,380 F1F1F1S1F1F1F10 1.11) = $3,111.80External financing need = $16,095 - $2,131.20 - $3,500 - $7,500 - $3,111.80 = -$148

Hungry Howie's Is Currently Operating at Full Capacity