Maggie\'s Muffins, Inc., generated $2,000,000 in sales during 2013, and its year
ID: 2725904 • Letter: M
Question
Maggie's Muffins, Inc., generated $2,000,000 in sales during 2013, and its year-end total assets were $1,300,000. Also, at year-end 2013, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,000 of accruals. Looking ahead to 2014, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 3%, and its payout ratio will be 45%. How large a sales increase can the company achieve without having to raise funds externally; that is, what is its self-supporting growth rate? Do not round intermediate steps. Round your answers to the nearest whole.
Sales can increase by $_______ , that is by ________%.
Explanation / Answer
2013
2014
Sales
20,00,000
22,47,191
Profit 3%
60,000
67,416
Divident payaout 45%
27,000
30,337
Retained earnings
33,000
37,079
Current liabilities (A)
10,00,000
11,23,601
Notes payable
3,00,000
Accounts payable
5,00,000
Accruals
2,00,000
Total assets ( C)
13,00,000
14,60,680
Share holder's fund ( C)-(A)-(B)
3,00,000
3,37,079
Retained earning
33,000
70,079
Equity
2,67,000
2,67,000
ROE
22.47%
Divident payaout
0.45
Self supporting growth rate ROE*(1-divident payoutratio)
12.36%
2013
2014
Sales
20,00,000
22,47,191
Profit 3%
60,000
67,416
Divident payaout 45%
27,000
30,337
Retained earnings
33,000
37,079
Current liabilities (A)
10,00,000
11,23,601
Notes payable
3,00,000
Accounts payable
5,00,000
Accruals
2,00,000
Total assets ( C)
13,00,000
14,60,680
Share holder's fund ( C)-(A)-(B)
3,00,000
3,37,079
Retained earning
33,000
70,079
Equity
2,67,000
2,67,000
ROE
22.47%
Divident payaout
0.45
Self supporting growth rate ROE*(1-divident payoutratio)
12.36%
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