Answered step by step
Verified Expert Solution
Question
1 Approved Answer
2. More on the AFN (Additional Funds Needed) equation Green Moose Industries reported sales of $775,000 at the end of last year, but this year,
2. More on the AFN (Additional Funds Needed) equation Green Moose Industries reported sales of $775,000 at the end of last year, but this year, sales are expected to grow by 8%. Green Moose expects to maintain its current profit margin of 21% and dividend payout ratio of 20%. The following information was taken from Green Moose's balance sheet: Total assets: Accounts payable: Notes payable: Accrued liabilities: $500,000 $70,000 $35,000 $60,000 Based on the AFN equation, the firm's AFN for the current year is A positively signed AFN value represents: O A shortage of internally generated funds that must be raised outside the company to finance the company's forecasted future growth. O A point at which the funds generated within the firm equal the demands for funds to finance the firm's future expected sales requirements. O A surplus of internally generated funds that can be invested in physical or financial assets or paid out as additional dividends. Because of its excess funds, Green Moose Industries is thinking about raising its dividend payout ratio to satisfy shareholders. Green Moose could pay out of its earnings to shareholders without needing to raise any external capital.(Hint: What can Green Moose increase its dividend payout ratio to before the AFN becomes positive?)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started