Distribution Limited projects sales next year to be $4 million and expects to earn 5% of that amount after taxes. The company is currently in the process of projecting its financial needs and has made the following assumptions (projections): - Current Assets will equal 8% of sales, and fixed assets will remain at their current level of $1million. - Common equity is currently $0.6million (made up entirely of Retained earnings), and the company pays out half of its after-tax earnings in dividends. - The company has short-term payables that normally equal 7% of sales each and it has no long-term debt outstanding. What are the company’s financing needs for the coming year?
Distribution Limited projects sales next year to be $4 million and expects to earn 5% of that amount after taxes. The company is currently in the process of projecting its financial needs and has made the following assumptions (projections): - Current Assets will equal 8% of sales, and fixed assets will remain at their current level of $1million. - Common equity is currently $0.6million (made up entirely of Retained earnings), and the company pays out half of its after-tax earnings in dividends. - The company has short-term payables that normally equal 7% of sales each and it has no long-term debt outstanding. What are the company’s financing needs for the coming year?
Chapter4: Financial Planning And Forecasting
Section: Chapter Questions
Problem 9P
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Distribution Limited projects sales next year to be $4 million and expects to earn 5% of that amount after taxes. The company is currently in the process of projecting its financial needs and has made the following assumptions (projections):
- Current Assets will equal 8% of sales, and fixed assets will remain at their current level of $1million.
- Common equity is currently $0.6million (made up entirely of
- The company has short-term payables that normally equal 7% of sales each and it has no long-term debt outstanding.
What are the company’s financing needs for the coming year?
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