Fuzzy Button Clothing Company reported sales of $743, at the end of last year, but this year, sales are expected to grow by 7%. Fuzzy Button expects to maintain its current profit margin of 23% and dividend payout ratio of 20%. The firm's total assets equaled $475,000 and were operated at full capacity, Fuzzy Button's balance sheet shows the following current liabilities: accounts payable of $60,000, notes payable of $35,000, and accrued liabilities of $60,000. Based on the AFN (Additional Funds Needed) equation, what is the firm's AFN for the coming year? $121,432 $145,718 -$139,647 $127,504 A negatively-Signed AFN value represents: A point at which the funds generated within the firm equal the demands for funds to finance the firm's future expected sales requirements. A shortage of internally generated funds that must be raised outside the company to finance the company's forecasted future growth. 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, Fuzzy Button is thinking about raising its dividend payout ratio to satisfy shareholders. What percentage of its earnings can Fuzzy Button pay to shareholders without needing to raise any external capital? (Hint: What can Fuzzy Button increase its dividend payout ratio to before the AFN becomes positive?) 82.1% 86.4% Water and Power Co. (W&P) currently has $540,000 in total assets and sales of $1,820,000. Half of W&P's total assets come from net fixed assets, and the rest are current assets. The firm expects sales to grow by 21% in the next year. According to the AFN equation, the amount of additional assets required to support this level of sales is $ W&P was using its fixed assets at only 96% of capacity last year. How much sales could the firm have supported last year with its current level of fixed assets? 0 $2,275,000 O $1,611,458 0 $2,180,208 $1,895,833 When you consider that W&P's fixed assets were being underused, its target fixed assets to sales ratio should be %. When you consider that W&P's fixed assets were being underused, how much fixed assets must W&P raise to support its expected sales for next year? $50,177 O $52,358 $43,632 $37,087 Attempts: Keep the Highest: 12 4. Financial ratios in the forecasting process Your boss has asked you to take a closer look at your company's credit policies. You have been given the following information: Accounts receivable balance: $620,000 Average daily sales: $13,111 Weighted average cost of capital: 9% Your firm's days sales outstanding (DSO) is Your boss is unhappy with your company's DSO and wants to bring it down to the industry average of 25 days. The marketing department told you that they expect sales to grow by 12% next year. This means that your company can expect to have an accounts receivable balance of next year
