The firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming year. In the
year that just ended, Blue Elk Manufacturing generated $500,000 net income on sales of $13,000,000. The firm expects sales to increase by 16% this coming year and also expects to maintain its long-run dividend payout ratio of 45%. Suppose Blue Elk Manufacturing's assets are fully utilized, use the additional funds needed (AFN) equation to determine the increase in total assets that is necessary to support Blue Elk Manufacturing's expected sales. $460,000 $576,000 $528,000 $384,000 When a firm grows, some liabilities grow spontaneously along with sales. Spontaneous liabilities are a source of capital that the firm will generate internally, so they reduce the need for external capital. How much of the total increase in assets will be supplied by spontaneous liabilities for Blue Elk Manufacturing this year? $67,200 $51,200 $64,000 $76,800 In addition, Blue Elk Manufacturing is expected to generate net income this year. The firm will pay cut some of its earnings as dividends but will retain the rest for future asset investment. Again, the more a firm generates internally from its operations, the less it will have to raise externally from the capital markets. Assume that the firm's profit margin and dividend payout ratio are expected to remain constant. Given the preceding information, Blue Elk Manufacturing is expected to generate from operations that will be added to retained earnings. According to the AFN equation and projections for Blue Elk Manufacturing, the firm's AFN is
1 answer:
You might be interested in