Ask Question
4 April, 16:24

Galehouse Gas Stations Inc. expects sales to increase from $1,510,000 to $1,710,000 next year. Galehouse believes that net assets (Assets - Liabilities) will represent 30 percent of sales. His firm has an 8 percent return on sales and pays 45 percent of profits out as dividends.

+1
Answers (1)
  1. 4 April, 20:12
    0
    The net income will increase by 16,000, the dividends will increase by 7,200 and 8,800 increase in equity

    Explanation:

    Increase in sale for 200,000 (1,710,000-1,510,000)

    Now, we calculate the increase in the net income

    200,000 x 8% = 16,000 increase on net income

    And now the increase in dividends

    16,000 x 45% dividends payout ratio = 7,200 increase in dividends

    With this we can relate to how much the retained earnings will grow based on this increase on sales:

    16,000 - 7,200 = 8,800 increase in equity
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Galehouse Gas Stations Inc. expects sales to increase from $1,510,000 to $1,710,000 next year. Galehouse believes that net assets (Assets - ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers