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Bryans muffins, Inc , generated $5,000,000 in sales during 2013, a

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Bryan\'s muffins, Inc., generated $5,000,000 in sales
during 2013, and it\'s year end total assets were
$2,500,000. 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 accurals.
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 asa
sales, the profit margin will be 7%, and its payout ratio well
be 80%. How large a sales increase can we have without
having to raise funds externally, what is its self supporting
growth rate?
Solution
Net profit= Sales x profit margin
= $5,000,000 x 7%
= $350,000
ROA= Net profit / Total Assets
= $350,000/ $2,500,000
=14%
Retention ratio b= 1- payout ratio
= 1- 0.80
= 0.20
Self-supporting growth rate is also known as internal

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Bryan\'s muffins, Inc., generated $5,000,000 in sales during 2013, and it\'s year end total assets were $2,500,000. 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 accurals. 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 asa sales, the profit margin will be 7%, and its payout ratio well be 80%. How large a sales increase can we have without having to raise funds externally, what is it ...
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