The following is the financial statement of Executive Dynamic Mattress for the year ended December 2018. Refer Table 18.2

INCOME STATEMENT, 2018
Revenue	$	3,100.0
Cost of goods sold		2,790.0
Depreciation		22.9
EBIT	$	287.1
Interest expense		5.7
Earnings before taxes	$	281.4
Taxes (50% of 6)		140.7
Net income	$	140.7
Dividends		95.0
Reinvested earnings	$	45.7
Operating cash flow	$	163.6

BALANCE SHEET, YEAR-END
	2017				2018
Assets
Net working capital	$	226.0			$	341.0
Fixed assets		381.0				387.5
Total net assets	$	607.0			$	728.5
Liabilities and Shareholders’ Equity
Long-term debt	$	57.0			$	132.8
Shareholders’ equity		550.0				595.7
Total liabilities and shareholders’ equity	$	607.0			$	728.5

BALANCE SHEET, YEAR-END
	2018
Sources and Uses of Funds
Operating cash flow	$	163.6
Increase in working capital		115.0
Investments in fixed assets		29.4
Dividends		95.0
Total uses of cash		239.4
Required external capital		75.8
Financial Ratios
Debt ratio		0.2
Interest coverage		50.4

Use the revised model to generate a new financial plan for 2021. How would its financial plan change if the dividend payout ratio were cut to 30%? What would be required external financing? (Input all amounts as positive values. Do not round intermediate calculations. Round "Debt ratio" to 2 decimal places and other answers to 1 decimal place.)

 

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Sources and Uses of Funds Operating cash flow Increase in working capital Investments in fixed assets Dividends Total uses of cash Required external financing Debt ratio Financial Ratios Interest coverage Sources and Uses of Funds Operating cash flow Increase in working capital Investments in fixed assets Dividends Total uses of cash Required external financing Debt ratio Financial Ratios Interest coverage

Answer rating: 100% (QA)

To generate a new financial plan for 2021 and assess the impact of cutting the dividend payout ratio to 30 lets first calculate the relevant values ba... View the full answer