Blue Elk Manufacturing reported sales of $720,000 at the end of last year; but this year, sales are expected to grow by 6%. Blue Elk expects to maintain its current profit margin of 20% and dividend payout ratio of 20%. The firm’s total assets equaled $425,000 and were operated at full capacity. Blue Elk’s balance sheet shows the following current liabilities: accounts payable of $60,000, notes payable of $45,000, and accrued liabilities of $60,000. Based on the AFN (Additional Funds Needed) equation, what is the firm’s AFN for the coming year? Because of its excess funds, Blue Elk is thinking about raising its dividend payout ratio to satisfy shareholders. What percentage of its earnings can Blue Elk pay to shareholders without needing to raise any external capital? (Hint: What can Blue Elk increase its dividend payout ratio to before the AFN becomes positive?)

Blue Elk Manufacturing reported sales of $720,000 at the end of last year; but this year, sales are expected to grow by 6%. Blue Elk expects to maintain its current profit margin of 20% and dividend payout ratio of 20%. The firm’s total assets equaled $425,000 and were operated at full capacity. Blue Elk’s balance sheet shows the following current liabilities: accounts payable of $60,000, notes payable of $45,000, and accrued liabilities of $60,000. Based on the AFN (Additional Funds Needed) equation, what is the firm’s AFN for the coming year? Because of its excess funds, Blue Elk is thinking about raising its dividend payout ratio to satisfy shareholders. What percentage of its earnings can Blue Elk pay to shareholders without needing to raise any external capital? (Hint: What can Blue Elk increase its dividend payout ratio to before the AFN becomes positive?)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 3P

See similar textbooks

Similar questions

Cold Duck Manufacturing Inc. reported sales of $743,000 at the end of last year, but this year, sales are expected to grow by 10%. Cold Duck expects to maintain its current profit margin of 24% and dividend payout ratio of 25%. The following information was taken from Cold Duck’s balance sheet: Total assets: $475,000 Accounts payable: $65,000 Notes payable: $45,000 Accrued liabilities: $70,000 Based on the AFN equation, the firm’s AFN for the current year is_________. A positively signed AFN value represents: -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. -a point at which the funds generated within the firm equal the demands for funds to finance the firm’s future expected sales requirements. Because of its excess…
Green Moose Industries reported sales of $720,000 at the end of last year, but this year, sales are expected to grow by 6%. Green Moose expects to maintain its current profit margin of 23% and dividend payout ratio of 20%. The following information was taken from Green Moose's balance sheet: Total assets: $450,000 Accounts payable: $60,000 Notes payable: $30,000 Accrued liabilities: $65,000 Based on the AFN equation, the firm's AFN for the current year is A positively signed AFN value represents: A surplus of internally generated funds that can be invested in physical or financial assets or paid out as additional dividends. A shortage of internally generated funds that must be raised outside the company to finance the company's forecasted future growth. A point at which the funds generated within the firm equal the demands for funds to finance the firm's future expected sales requirements. out Because of its excess funds, Green Moose Industries is thinking about raising its dividend…
Green Moose Industries reported sales of $743,000 at the end of last year; but this year, sales are expected to grow by 9%. Green Moose expects to maintain its current profit margin of 24% and dividend payout ratio of 30%. The firm’s total assets equaled $475,000 and were operated at full capacity. Green Moose’s balance sheet shows the following current liabilities: accounts payable of $60,000, notes payable of $40,000, and accrued liabilities of $80,000. Based on the AFN (Additional Funds Needed) equation, what is the firm’s AFN for the coming year? -$105,908 -$100,613 -$116,499 -$137,680 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…
Green Caterpillar Garden Supplies Inc. reported sales of $890,000 at the end of last year, but this year, sales are expected to grow by 7%. Green Caterpillar expects to maintain its current profit margin of 24% and dividend payout ratio of 10%. The following information was taken from Green Caterpillar’s balance sheet: Total assets: $425,000 Accounts payable: $70,000 Notes payable: $35,000 Accrued liabilities: $60,000 Based on the AFN equation, the firm’s AFN for the current year is Because of its excess funds, Green Caterpillar Garden Supplies Inc. is thinking about raising its dividend payout ratio to satisfy shareholders. Green Caterpillar could pay out of its earnings to shareholders without needing to raise any external capital.(Hint: What can Green Caterpillar increase its dividend payout ratio to before the AFN becomes positive?)
Green Caterpillar Garden Supplies Inc. reported sales of $720,000 at the end of last year, but this year, sales are expected to grow by 9%. Green Caterpillar expects to maintain its current profit margin of 22% and dividend payout ratio of 15%. The following information was taken from Green Caterpillar’s balance sheet: Total assets: $400,000 Accounts payable: $80,000 Notes payable: $30,000 Accrued liabilities: $60,000 Based on the AFN equation, the firm’s AFN for the current year is . A positively signed AFN value represents: A shortage of internally generated funds that must be raised outside the company to finance the company’s forecasted future growth. 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 surplus of internally generated funds that can be invested in physical or financial assets or paid out as additional dividends. Because…
Hendo Inc. is constructing its pro forma financial statements for this year. At years end, Assets were $650,000 and Accounts Payable (the only liabilities account) was $175,000. Sales for the year were $825,000. Hendo expects to grow by 12% this year. Assets and Accounts Payable are expected to grow proportionally to Sales. Common Stock currently equals $175,000 and Retained Earnings are $127,000. Hendo plans to sell $18,000 of new common stock this year. The firm's profit margin on Sales is 5.5%, and 45% of its earnings will be paid out in dividends. How much NEW long-term debt financing will Hendo need this year to finance its expected growth? Hendo is currently operating at full capapcity.
At last year’s end, total assets for Roberts Inc. were $1.2 million and accounts payable were $375,000. Sales, which last year were $2.5 million, are expected to increase by 25 percent this year. Total assets and accounts payable are proportional to sales, and that relationship will be maintained. Robert Inc. typically uses no current liabilities other than accounts payable. Common stock amounted to $425,000 last year, and retained earnings were $295,000. Roberts Inc. plans to sell new common stock in the amount of $75,000. The Firm’s profit margin on sales is 6 percent; and 60 percent of earnings will be retained. Set up Roberts Inc.’s last year balance sheet, to the extent possible, based on the information provided in this problem. Based on the balance sheet setup in Part a above, determine how much was Roberts Inc.’s long-term debt last year? Perform financial forecasting using percent of sales method (i.e., constant ratio method; do not use the AFN Equation) to determine how much…
Suppose that Gyp Sum Industries currently has the balance sheet shown below, and that sales for the year just ended were $10.6 million. The firm also has a profit margin of 25 percent, a retention ratio of 30 percent, and expects sales of $8.6 million next year. Assets Current $2,396,000 Current liabilities assets Fixed assets 4,600,000 Liabilities and Equity Total assets $6,996,000 Long-term debt Equity Total liabilities and equity $ 2,168,760 1,800,000 3,027,240 $6,996,000 If all assets and current liabilities are expected to shrink with sales, what amount of additional funds will Gyp Sum need from external sources to fund the expected growth? (Enter your answer in dollars not in millions. Negative amount should be indicated by a minus sign.) Additional funds needed
Suppose that Gyp Sum Industries currently has the balance sheet shown below, and that sales for the year just ended were $10.9 million. The firm also has a profit margin of 25 percent and a retention ratio of 30 percent, and expects sales of $8.9 million next year. Assets Current assets Fixed assets Total assets $ 2,621,000 4,900,000 $ 7,521,000 Liabilities and Equity Current liabilities Long-term debt Equity Total liabilities and equity If all assets and current liabilities are expected to shrink with sales, what amount of additional funds will Gyp Sum need from external sources to fund the expected growth? Note: Enter your answer in dollars not in millions. Negative amount should be indicated by a minus sign. X Answer is complete but not entirely correct. Additional funds needed (243,300) X $ 2,557,140 1,950,000 3,013,860 $ 7,521,000
Suppose that Gyp Sum Industries currently has the balance sheet shown below, and that sales for the year just ended were $10.2 million. The firm also has a profit margin of 30 percent and a retention ratio of 20 percent, and expects sales of $8.2 million next year. Assets Current assets Fixed assets Total assets $ 2,124,000 4,200,000 $ 6,324,000 Liabilities and Equity Current liabilities Long-term debt Equity Total liabilities and equity Additional funds needed $ If all assets and current liabilities are expected to shrink with sales, what amount of additional funds will Gyp Sum need from external sources to fund the expected growth? Note: Enter your answer in dollars not in millions. Negative amount should be indicated by a minus sign. Answer is complete but not entirely correct. 1,397,200 x $ 1,707,480 1,600,000 3,016,520 $ 6,324,000
The Optical Scam Company has forecast an 17 percent sales growth rate for next year. The current financial statements are shown below. Current assets, fixed assets, and short-term debt are proportional to sales. INCOME STATEMENT Sales $ 47,000,000 Costs 37,900,000 Taxable income $ 9,100,000 Taxes 3,185,000 Net income $ 5,915,000 Dividends $ 2,366,000 Additions to retained earnings $ 3,549,000 BALANCE SHEET Assets Liabilities and Equity Current assets $ 15,930,000 Short-term debt $ 12,690,000 Long-term debt 13,190,000 Fixed assets 40,000,000 Common stock $ 4,000,000 Accumulated retained earnings 26,050,000 Total equity $ 30,050,000 Total assets $ 55,930,000 Total liabilities and equity $ 55,930,000…
Suppose that Psy Ops Industries currently has the balance sheet shown below, and that sales for the year just ended were $4.4 million. The firm also has a profit margin of 20 percent, a retention ratio of 25 percent, and expects sales of $7.4 million next year. Assets Current $1,980,000 Current liabilities Long-term debt Equity assets Fixed assets 3,700,000 Liabilities and Equity Total assets $5,680,000 Total liabilities and equity $ 1,672,000 1,800,000 2,208,000 $ $5,680,000 If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will Psy Ops need from external sources to fund the expected growth? (Enter your answer in dollars not in millions. Negative amount should be indicated by a minus sign.) Additional funds needed