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2. Calculate additional funds needed based on the assumption that the firm has sufficient excess capacity in their fixed assets for any expansion in the
| 2. Calculate additional funds needed based on the assumption that the firm has sufficient excess capacity in their fixed assets for any expansion in the coming year. You may still assume that current assets are proportional to sales. | |||||||
| Make all other assumptions as in problem #1. | |||||||
| NS0 = | $1,600,000.00 | ||||||
| NI0 = | $160,000.00 | ||||||
| Current assets = | $520,000.00 | req inc in sales = '(TA0/NS0)*Delta_Net_Sales | |||||
| fixed assets = | $480,000.00 | examine TA0/NS0 more closely | |||||
| accounts payable = | $48,000.00 | note that TA0= Fao where | |||||
| accrued liabilities = | $32,000.00 | CA0 = current assets as time 0, | |||||
| g = | 35% | FA0 = fixed assets at a time 0 | |||||
| retention rate | 100% | ||||||
| forcasted sales NS1 = | $2,160,000.00 | req inc in sales = ='((CA0+FA0)/NS0*Delta_Net_Sales) | |||||
| delta_net_sales = | $560,000.00 | (CA0+FA0)/NS0=CA0/NS0+FA0/NS0 | |||||
| total assets = | $1,000,000.00 | req incr in sales = '(CA0/NS0+FA0/NS0)*Delta_Net_Sales | |||||
| Required increase in assets | req incr in sales = '(CA0/NS0+FA0/NS0)*Delta_Net_Sales | ||||||
| -Spontaneously Generated funds | -$28,000.00 | =(CA0/NS0)*Delta_Net_Sales | |||||
| Increase in Retained Earnings | -$216,000.00 | +(FA0/NS0)*Delta_Net_Sales | |||||
| AFN = | =increase in CA +increase in FA | ||||||
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Auditing A Practical Approach
Authors: Robyn Moroney, Fiona Campbell, Jane Hamilton
4th Edition
0730382648, 978-0730382645
