Question

2. More on the AFN (Additional Funds Needed) equation Blue Elk Manufacturing reported sales of $890,000 at the end of last year; but this year, sales are expected to grow by 6%. Blue Elk expects to maintain its current profit margin of 21% and dividend payout ratio of 25%. The firm's total assets equaled $400,000 and were operated at fll capacity. Blue Elk's balance sheet shows the following current liabilities: accounts payable of $60,000, notes payable of $40,000, and accrued liabilities of $65,000. Based on the AFN (Additional Funds Needed) equation, what is the firm's AFN for the coming year? -$165,106 -$118,876 -$132,086 -$125,481 A negatively-signed AFN value represents: A shortage of internally generated funds that must be raised outside the company to finance the company's forecasted future growth A surplus of internally generated funds that can be invested in physical or financial assets or paid out as additional dividends A point at which the funds generated with in the firm equal the demands for funds to finance the firm's future expected sales requirements.

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

- 2x cell Fill insert Delete Format *** conditional Format 2 BOND - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut Σ AutoSum : A Calibri -11AA = = = Dr Wrap Text General E Copy Fill Paste BI Merge & Center - U $ D- DA % , :.: Conditional Format Sort & Cell Find & Format Painter Insert Delete Format Formatting as Table Styles Clear Filter Select Clipboard Font Alignment Number Styles Cells Editing F907 A G 905 SALES 890000 906 DIVIDEND PAYOUT 25% 907 PROFIT MARGIN= 21% 908 INCREASE IN SALES = 6% 909 910 1 INCREASE IN ASSETS NECESSARY TO SUPPORT INCREASE IN SALES = INCREASE IN SALES X TOTAL ASSETS 911 400000 x 6% 24000.00 912 2 INCREASE IN LIABILITIES NECESSARY TO SUPPORT INCREASE IN SALES = INCREASE IN SALES X CURRENT LIABILITIES 914 ACCOUNTS PAYABLE + ACCRUED LAIBILITIES = 125000 X 6% = 7500.00 915 916 3 NET INCOME = 890000*(1+0.06) X 21% = 198114.00 917 LESS DIVIDEND PAYOUT 25% 49528.50 SO ADDITION TO RETAINED EARNINGS = 75% 148585.50 919 920 4 AFN = INCREASE IN ASSETS - INCREASE IN LAIBILTIES - INCREASE IN RETAINED EARNINGS 921 STEP 1- STEP 2 - STEP 3 -132085.50 922 -132086 ROUND FIGURE 923 H YIELD SPOT Sheet2 AFN BANKING NOTE 51 53 CLEAN PRICE $10 BIDDING, UNDERWRITING EUAC AW LIFELP, IP, MRP, INFLATION WARRANT refund 54 55 56 I Rea ferences: 1198 BOJ 130% - 2. 9 * 10 ENG 913 918 O 0 o e 9 m 3 W X 27-11-2019

BOND - Microsoft Excel (Product Activation Failed) Add-Ins File Home Insert Page Layout Formulas Data Review View - 2x % Cut Dr General -11AA = = = B- A Wrap Text Merge & Center - Σ AutoSum : A Fill Z Sort & Find & U $ -% . Cell Styles Insert Delete Format Conditional Format Formatting as Table Styles 2 Clear Calibri E Copy Paste Format Painter B I Clipboard N908 _ J K Filter Editing Select Font Alignment Number Cells L M N O P R 905 906 907 908 909 910 911 912 913 A NEGATIVELY SIGNED AFN VALUE REPRESENTS A SURPLUS OF INTERNALLY GENERATED FUNDS THAT CAN BE INVESTED IN PHYSICAL OR FINANCIAL ASSETS OR PAID OUT AS ADDITIONAL DIVIDENDS 914 915 MAXIMUM DIVIDEND THAT CAN BE PAID = NET INCOME + INCREASE IN CURRENT LIABILITIES - INCREASE IN ASSETS 198114 + 7500 - 24000 = 181614.00 91.7% 916 917 918 919 920 921 922 923 H Rea DIVIDEND PAYOUT = 181614/198114 = max dividend / net income AFN BANKING NOTE 51 53 CLEAN PRICE 510 BIDDING, UNDERWRITING EUAC AW LIFELP, IP, MRP, INFLATION WARRANT refund YIELD SPOT Sheet2 ferences: 1198 54 55 I 56 BOJ 130% 0 + 2. B 9 * 40 ENG 27-11-2019