2. The Additional Funds Needed (AFN) equation Green Caterpillar Garden Supplies Inc. has the following end-of-year balance sheet: The firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming year. in the year that just ended, Green Caterpillar Garden Supplies inc. generated $300,000 net income on sales of $14,500,000. The firm expects sales to increase by 17% this coming year and also expects to maintain its long-run dividend payout ratio of 30%. Suppose Green Caterpillar Garden Supplies Inci's assets are fully utilized. Use the additional funds needed (AFN) equation to determine the increase in total assets that is necessary to support Green Caterpillar Garden Supplies Inc.'s expected sales. (Note: Do not round intermedlate calculations.) $561,000$586,500$459,000$510,000 When a firm grows, some liablities grow spontaneously along with sales. Spontaneous liabilities are a source of capital that the firm will generate internally, so they reduce the need for external capital, How much of the total increase in assets will be supplied by spontaneous liabilities for Green Caterpillar Garden Supplies inc. this year? (Note: Do not round intermediate calculations.) $68,000$78,200$61,200$74,800 $74,800 In addition, Green Caterpiliar Garden Supplies Inc- is expected to generate net income this year. The firm will pay out some of its eamings as dividends but wifi retain the rest for future asset investment. Again, the more a firm generates internally from its operations, the lass it will have to raise extemaily from the capitai markets. Assume that the firm's profit margin and dividend payout ratio are expected to remain constant. Given the preceding information, Green Caterpillar Garden supplies inc. is expected to generata 5 . from operations that wili be added to retained earnings. (Note: Do not round intermediate calculations.) According to the AMs equation and projections for Green Coterpillar Garden Supplies inc, the firm's AFN is 5 (Note: Do not round intermed ate calculstions.) Corporate decision makers and analysts often use a particular technique, called a DuPont analysis, to better understand the foctors that drive a compaty's financial performance, as reflected by its return on equity (ROE). By using the DuPont equation, which disaggregates the RoE into three components, analysts can see why a compary's ROE may have changed for better or worse and identify particular company strengths and weaknesses. The Dupont Equation A Dupont analysis is conducted using the Dupont equaben, which helps to identify and analyze three important factors that drive a company's ROE, According to the equavon, which of the following factors directly affect a compary's ROE? Chech ill that apply. Total Assets / Total Commen Equity Net income / Sales Price per Share / Earnings per Share Mott ifvestors and analysts in the financial community pay particular attention to a company's ROL. The ROE can be calculated simply by dividing a firm's net income by the firm's tharehalder's equity. and it can be subdiyded into the key factors that drive the Rot. Investors and analysts focus on these drivers to develop a clearer picture of what is happening within a company, An analyst gathered the following data and calculated the variout terms of the bupoeit equation for three companies? Most investors and anaiysts in the finandal Cofrirfinity pay particular attention to a company's ROE. The ROE can be calculated simply by dividing a firm's net income by the firm's shareholder's equity, and it can be subdivided into the key factors that drive the rOE. Investors and analysts focus on these drivers to develop a clearer picture of what is happening within a company. An analyst gathered the following data and calculated the various terms of the DuPont equation for three companies: Referring to these data, which of the following condusions will be true about the comparies' ROEs? The main driver of Company A's inderior MOE, as compared with that of Company C's ROE, is its higher total asset furnover ratio, The main driver of Company As inferior AOE, as compared with that of Company Bis and Company C's Aot, is its ise of higher debt finthncing. The main drivet of Compony C's superior ROE, as compared with that of Company A's and Company b's ROE, ha its greater use of debt. financing