Consider the following information for Smart Products: total assets=$1000; sales=$1540; net profit margin=12%; dividend payout ratio=40%; accounts payable=$308.If sales are forecast to increase 30%,what is the "short cut" estimate of external funds required (EFR)?

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Quizplus · Accepted Answer

The "short cut" estimate of EFR can be calculated using the formula: EFR = (Assets/Sales) * ΔSales - (Net Profit Margin * (1 - Dividend Payout Ratio) * Sales). Here, ΔSales = 30% of $1540 = $462. So, EFR = ($1000/$1540) * $462 - (0.12 * (1 - 0.40) * $1540) = $300 - $236 = $64.

Consider the Following Information for Smart Products: Total Assets=$1000; Sales=$1540;