C D west.cengagenow.com/ilm/takeAssignment/takeAssignmentMaindo signment: Chapte
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C D west.cengagenow.com/ilm/takeAssignment/takeAssignmentMaindo signment: Chapter 17-Financial Planning and Forecasting Assignment score: 2000% save Exit Submit Assignment for Grading Quenzion 9 of 10 Check My Work (a remaining) uestions Problem 17.09 Problem 17.07:Visited, Not Yet ludged o Problem 17-9 Sales increase Plerce Furnishings generated $2 million in sales during 2012, and its year-end total assets wers $1.6 million. Alsa, at year end 2012, current liabilities were $500,000, consisting of $200,000 of notes payable, $200,000 of accounts payable, and $100,000 of accrued labilities. Looking ahead to 2013, the company estimates that iks assets must incroase by $0.80 for every $1.00 increase in sales. Perce's profit margin is 7%, and its retention ratio is 60%. How commpletely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest cent. Check sty Work (a zemaining) Problem 17.09Explanation / Answer
Current sales ( S0) = $2,000,000
Current assets (A0*) = $1,600,000
Current liabilities (CL) = $500,000
Notes payable (NP) = $200,000
Accounts payable (AP) = $200,000
Accural liabilities (AL) = $100,000
Net margin (M) =7%
Payout ratio =60%
A0*/S0 = $1,600,00 / $2,000,000 = 0.80
L0*/S0 (spotenaous liability ratios) = (AP+AL)/S0 = $300,000 / $2,000,000 = 15%
AFN= (A0*/S0)*change in sales - (L0*/S0)*change in sales - (M)(S1)(1-PAYOUT RATIO)
AFN= (0.80)*change in sales - (0.15)*change in sales-(0.07)(S1)(1-0.60)
AFN = 0.65*CHANGE IN SALES - 0.028S1
AFN= 0.65(S1-S0) -0.028S1
AFN = 0.65(S1-$2,000,000) -0.028S1
$1,300,000-0.622S1 =0
0.622S1 = $1,300,000
S1 = 2,090,032.15
S0+ Chnage in sales = $2,090,032.15
$2,000,000 + change in sales = $2,090,032.15
change in sales = $90,032.15 or 4.502% sales can increase before need of additional funds
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