Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Fuzzy Button Clothing Company has the following end-of-year balance sheet: The firm is currently in the process of forecasting sales, asset requirements, and required funding
Fuzzy Button Clothing Company 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, Fuzzy Button Clothing Company generated $350,000 net income on sales of $14,000,000. 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 Fuzzy Button Clothing Company's assets are fully utilized. Use the additional funds needed (AFN) equation to determine the increase in total assets that is necessary to support Fuzzy Button Clothing Company's expected sales. (Note: Do not round intermediate calculations.) $408,000 $510,000$535,500$484,500 When a firm grows, some liabilities 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 liabilies for Button Clothing Company this year? (Note: Do not round intermediate calculations.) $64,600$68,000$71,400$54,400 In addition, Fuzzy Button Clothing Company is expected to generate net income this year. The firm will pay out some of its earnings as dividends but will retain the rest for future asset investment. Again, the more a firm generates internally from its operations, the less it will have to raise externally from the capital markets. Assume that the firm's profit margin and dividend payout ratio are expected to remain constant. Given the preceding information, Fuzzy Button Clothing Company is expected to generate $ from operations that be added retained earnings. (Note: Do not round intermediate calculations.) According to the AFN equation and projections for Fuzzy Button Clothing Company, the firm's AFN is $ . (Note: Do not round intermediate calculations.)
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