Question

I In your business, assets, and liabilities have historically varied with sales. Assets are usually 82 percent of sales, and liabilities are usually 54 percent of sales. Your sales next year will be $208,000 which represents an increase of $40,000. Your profit margin is 11.99 percent. You anticipate that you will have an 42 owner payout of net profit. Using the percentage of sales method, determine the amount of additional financing or surplus for your business next year. (answer to two decimal places, negative numbers start with -)

Answer 1

Answer and Explanation:

Computation table for Surplus amount:

Particular Current year Future year

Sales $168,000 $208,000

Less: Net Profit 11.99% of sales $20,143.8 $24,932.2

Cost (sales - 11.99%) $147,856.8 $183,060.8

Owner's payout 42% of cost $62,099.856 $76,885.536

Surplus (Cost - Owner payout) $85,756.944 $106,175.264

Computation table for additional financing fund:

Particular Current year Future year

Assets 82% of sales $137,760 $170,560

Less: Liabilities 54% of sales $90,720 $112,320

Additional Funding $47,040 $58,240