You are given a choice of taking the simple interest on 100,000 invested for 2 years

The manning company has financial statements as shown below on page 115, which are representative of the company’s historical average. The firm is expecting a 20% 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. Using the present-of-sales method, determine whether the company has external financing needs, or a surplus of funds. (Hint: A profit margin and payout ratio must be found from the income statement.)

Income statement
Sales…………………………………………………………………………. $200.000
Expenses…………………………………………………………….. 158,000
Earnings before interest and taxes…………………………….. $ 42,000
Interest…………………………………………………………………….. 7,000
Earnings be taxes…………………………………………………….. $ 35,000
Taxes…………………………………………………………………. 15,000
Earnings after taxes……………………………………………… $ 20,000
Dividends…………………………………………………………… $ 6,000

Balance Sheet

Assets Liabilities
Cash………………………. $ 5,000 Accounts Payable………… $ 25,000
Accounts Receivable……..40,000 Accrued wages…………. 1,000
Inventory……………….. 75,000 Accrued Taxes……… 2,000
Current Assets……. .$ 120,000 Current liabilities….. $ 28,000
Fixed assets………. 80,000 Notes payable………. 7,000
Long term debts…… 15,000
Common Stock….. 120,000
Retained earnings….. 30,000
Total liabilities and
Total Assets………..$ 200,000 stockholders’ equity… $ 200,000

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