(12-1) Define each of the following terms:

Operating plan: financial plan

Spontaneous liabilities; profit margins; payout ratio

Additional funds needed (AFN); AFN equation; capital intensity ratio; self-supporting growth rate

Forecasted financial statement approach using percent of sales

Excess capacity; lumpy assets; economies of scale

Full capacity sales; target fixed assets/sales ratio; required level of fixed assets

(12-4) Name five key factors that affect a firms external financing requirements.

(12-4) Maggies Muffins, Inc., generated $5,000,000 in sales during 2013, and its year-end total assets were $2,5000,000. Also, at year-end 2013, current liabilities were $1,000,000, consisting of $3000,000 of notes payable, $5000,000 of accounts payable, and $2000,000 of accruals. Looking ahead to 2014, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 7%, and its payout ratio will be 80% how large a sales increase can the company achieve without having to raise funds externally - that is, what is its self-supporting growth rate?

(12-6) The Booth Companys sales are forecasted to double from $1,000 in 2013 to $2,000 in 2014. Here is the December 31, 2013, balance sheet.

Cash $100 Accounts payable $50

Accounts Receivable $200 Notes payable $150

Inventories $200 Accruals $50

Net Fixed Assets $500 Long-term debt $400

Common stock $100

_____ Retained earnings $250

Total assets $1,000 Total liabilities and equity $1,000

Booths fixed assets were used to only 50% of capacity during 2013, but its current assets were at their proper levels in relation to sales. All assets except fixed assets must increase at the same rate as sales, and fixed assets would also have to increase at the same rate if the current excess capacity did not exist. Booths after-tax profit margin is forecasted to be 5% and its payout ratio to be 60%. What is Booths additional funds needed (AFN) for the coming year?