Question
After adding a new line of widgets, Worldwide Widget Manufacturing, Inc., expects all assets and current liabilities to shrink with sales. The company has sales
After adding a new line of widgets, Worldwide Widget Manufacturing, Inc., expects all assets and current liabilities to shrink with sales. The company has sales for the year just ended of $20 million. The company also has a profit margin of 20 percent, a return ratio of 25 percent, and expected sales of $18 million next year. Worldwide Widget Manufacturing, Inc., shows the following on its balance sheet.
Assets | Liabilities and Equity |
Current assets- $2,500,000 | Current liabilities- $1,250,000 |
Fixed assets- $3,500,0000 | Long-term debt- $1,500,000 |
Total assets- $6,000,000 | Equity- $3,250,0000 |
Total liabilities and equity- $6,000,000 |
What amount of additional funds (AFN) will Worldwide Widget Manufacturing, Inc., need from external sources to fund the expected growth? What does the AFN show?
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