Question
Booth Companys sales are forecast to increase from $1,000 in 2021 to $2,000 in 2022. Here is the December 31, 2021, balance sheet: Cash $100
Booth Companys sales are forecast to increase from $1,000 in 2021 to $2,000 in 2022. Here is the December 31, 2021, 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 2021, but its current assets were at their proper levels. All assets except fixed assets increase at the same rate as sales, and fixed assets would also increase at the same rate if the current excess capacity did not exist. A/P and accruals will increase at the same rate as sales. Booths after-tax profit margin is forecasted to be 5%, and its payout ratio will be 60%. What is Booths additional funds needed (AFN) for the coming year?
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