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)?

Question

Quizplus · Accepted Answer

The "short cut" estimate of EFR is calculated as: (Sales increase * Net profit margin * (1 - Dividend payout ratio)) - (Sales increase * (Accounts payable / Sales)). Here, it is (0.3 * 1540 * 0.12 * 0.6) - (0.3 * (308 / 1540)) = $64.

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