TABLE 1 Sales $47,000 Current assets of $ 5,100, Current liabilities $ 6,200, &n
TABLE 1
|
Sales $47,000 |
Current assets of $ 5,100, |
Current liabilities $ 6,200, |
|
Cost 44,650 |
Net fixed assets of $51,500 |
Owners Equity 50, 400 |
|
|
||
|
Net Income 2,350 |
56,600 |
Owners Equ & Liab. 56,600 |
Sales are expected to increase by 3 percent next year. Net Income, that is, Net Profit Margin (NPM) is 5% of Sales. The firm has no long term debt and does not plan on acquiring any. The firm does not pay any dividends and all assets, short term liabilities, and costs vary directly with sales.
1. Base upon the above data in Table 1 the projected Total Asset will be]
[Work Space]
Circle A,B,C, or D
A. $51,500
B. $58,298
C. $56,600
D. Other $____
2. Based upon the above data how much additional financing (AFN) is required for next year?
USE: (Current Total Assets/Current Sales) x Change in Sales – (Current Liabilities/Current Sales) x
Change in Sales – [(NPM x Projected Sales) x (1- Dividend ratio)]. Note that, no dividend is paid.
[Work space]
Circle A, B, C, or D.
A. -$ 912
B. -$ 723
C. $ 967
D. $1,698
3. Assuming you have calculated a negative (less than zero) Additional Funds Needed (AFN) from the
above data (Table 1) then, and as we discussed in class, which of the following is correct:
- The company is taking on too less debt
- The company is taking on too much debt
- The company should revise its discretionary sources of financing
- The company should revise its spontaneous sources of financing
- The company has a shortfall in cash
.
Homework Answers
A. Total assets = 56600*103% = 58298
Option B, $58298
B. Change in sales = 47000 *3% = 1410
(Current Total Assets/Current Sales) x Change in Sales – (Current Liabilities/Current Sales) x Change in Sales – [(NPM x Projected Sales) x (1- Dividend ratio)]
= (56600/47000) x 1410– (6200/47000) x 1410– [(5% x 48410) x (1- 0)]
= -909
Closest is Option A
c. Option c, The company should revise its discretionary sources of financing
Add Answer to:
TABLE
1
Sales $47,000
Current assets of $ 5,100,
Current liabilities
$ 6,200,
&n
Sales are expected to increase by 3 percent next year
TABLE 1 Sales $47,000Current assets of $ 5,100,Current liabilities $ 6,200, Cost 44,650Net fixed assets of $51,500Owners Equity 50, 400 Net Income 2,35056,600Owners Equ & Liab. 56,600Sales are expected to increase by 3 percent next year. Net Income, that is, Net Profit Margin (NPM) is 5% of Sales. The firm has no long term debt and does not plan on acquiring any. The firm does not pay any dividends and all assets, short term liabilities, and costs vary directly with...
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3.
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1. Compute the external financing needed to support the
projected annual sales growth.
The most recent financial statements for Fleury, Inc., follow.
Sales for 2012 are projected to grow by 20%. Interest expense will
remain constant. The tax rate and the dividend payout rate will
remain constant. Costs, other expenses, current assets, fixed
assets, and accounts payable increase spontaneously with sales. If
the firm is operating at full capacity and no new debt or equity is
issued, what external financing...
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