Which of the following statements regarding Additional Funds Needed (AFN) is CORRECT??

Select one:

a. The term spontaneously generated funds refers to funds that a firm must raise externally as they do not automatically increase with sales.

b. If a firm retains all of its earnings, then it never requires any additional funds to support sales growth.

c. AFN are funds that a firm must raise from external sources, such as borrowing from a bank or by selling new stock.

d. A reduction in the dividend payout ratio would increase the AFN

Following data is used for the next 3 questions

Fantasy Toys Inc. is forecasting its additional funding needs for its 2021 year.

In 2020 Sales was $200,000, EBIT of $ $24,000, Net Income of $10,000, and Dividend Paid of $6,000.

The 2020 Balance Sheet was: Cash $1,000 Accounts payable $37,000 ST Investments 2,000 Accruals 3,000 Accts receivable 19,000 Notes Payable 25,000 Inventory 60,000 Common Stock 3,000 Net Fixed Assets 120,000 Retained Earnings 134,000 Total Assets $202,000 Total Liabilities & Equity $202,000

Assume that Fantasy is at full capacity and that Sales for 2021 is forecasted to grow by 5%. The 2021 Dividend payout ratio will be the same as the 2020 dividend payout ratio.

Question 2

What is Fantasy's Profit Margin? (Enter numbers and decimal only) Answer %

Question 3

What is Fantasy's Retention Ratio? (Enter numbers and decimal only) Answer

Question 4

Using the AFN equation, what is Fantasy's forecasted AFN for the 2021 year? (Enter numbers and decimal only) $ Answer