Galehouse Gas Stations Inc. expects sales to increase from $1,680,000 to $1,880,000 next year. Galehouse believes...

 

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Galehouse Gas Stations Inc. expects sales to increase from $1,680,000 to $1,880,000 next year. Galehouse believes that net assets (Assets Liabilities) will represent 60 percent of sales. His firm has an 10 percent return on sales and pays 30 percent of profits out as dividends. a. What effect will this growth have on funds? b. If the dividend payout is only 10 percent, what effect will this growth have on funds? Galehouse Gas Stations Inc. expects sales to increase from $1,680,000 to $1,880,000 next year. Galehouse believes that net assets (Assets Liabilities) will represent 60 percent of sales. His firm has an 10 percent return on sales and pays 30 percent of profits out as dividends. a. What effect will this growth have on funds? b. If the dividend payout is only 10 percent, what effect will this growth have on funds?

Answer rating: 100% (QA)

a To determine the effect of the sales growth on funds we first calculate the expected increase in n... View the full answer