AFN equation Aa oose Industries has the following end-of-year balance sheet: Gre
ID: 2811002 • Letter: A
Question
AFN equation Aa oose Industries has the following end-of-year balance sheet: Green Moose Industries Balance Sheet For the Year Ended on December 31 Assets Liabilities Current Assets: Current Liabilities: Cash and equivalents Accounts receivable Inventories $150,000 Accounts payable 400,000 Accrued liabilities 350,000Notes payable $900,000 Total Current Liabilities $250,000 150,000 100,000 $500,000 1,000,000 Total Current Assets Net Fixed Assets Long-Term Bonds Net plant and equipment (cost minus depreciation) $2,100,000 Total Debt $1,500,000 Common Equity Common stock 800,000 700,000 $1,500,000 $3,000,000 Retained earnings Total Common Equity Total Liabilities and Equity Total Assets $3,000,000 e firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming O Type here to searchExplanation / Answer
Increase in assets = Previous year's assets x Sales growth rate
= 3,000,000 x 16%
= $480,000
Hence, increase in assets necessary to support expected sales is $480,000. Hence correct option is (d)
Previous year's spontaneous liabilities = Accounts payables + Accrued liabilities
= 250,000 + 150,000
= $400,000
Spontaneous increase in liabilities = Previous year's spontaneous liabilities x Sales growth rate
= 400,000 x 16%
= $64,000
Hence, increase in spontaneous liabilities = $64,000
Hence, correct option is (b)
Profit margin in the previous year = Net income/Sales
= 450,000/13,000,000
= 3.4615%
Increase in retained earnings = Current year's sales x Profit margin x Retention rate
= (13,000,000 x 1.16) x 3.4615% x 55%
= $287,100
Additional funds needed = Increase in assets - Increase in spontaneous liabilities - Increase in retained earnings
= 480,000 - 64,000 - 287,100
= $128,900
Kindly give a positive rating if you are satisfied with the answer. Feel free to ask if you have any doubts. Thanks.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.