Question

uzzy Button Clothing Company has the following end-of-year balance sheet: Fuzzy Button Clothing Company Balance Sheet...

uzzy Button Clothing Company has the following end-of-year balance sheet:

Fuzzy Button Clothing Company

Balance Sheet

For the Year Ended on December 31

Assets Liabilities
Current Assets: Current Liabilities:
Cash and equivalents $150,000 Accounts payable $250,000
Accounts receivable 400,000 Accrued liabilities 150,000
Inventories 350,000 Notes payable 100,000
Total Current Assets $900,000 Total Current Liabilities $500,000
Net Fixed Assets: Long-Term Bonds 1,000,000
Net plant and equipment $2,100,000 Total Debt $1,500,000
(cost minus depreciation)
Common Equity
Common stock 800,000
Retained earnings 700,000
Total Common Equity $1,500,000
Total Assets $3,000,000 Total Liabilities and Equity $3,000,000

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 40%.

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.

$484,500

$510,000

$561,000

$535,500

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 liabilities for Fuzzy Button Clothing Company this year?

$71,400

$74,800

$64,600

$68,000

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 will be added to retained earnings.

According to the AFN equation and projections for Fuzzy Button Clothing Company, the firm’s AFN is $______

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Fuzzy Button Clothing Company reported sales of $720,000 at the end of last year; but this...
Fuzzy Button Clothing Company reported sales of $720,000 at the end of last year; but this year, sales are expected to grow by 10%. Fuzzy Buttonexpects to maintain its current profit margin of 20% and dividend payout ratio of 15%. The firm’s total assets equaled $500,000 and were operated at full capacity. Fuzzy Button’s balance sheet shows the following current liabilities: accounts payable of $80,000, notes payable of $25,000, and accrued liabilities of $80,000. Based on the AFN (Additional Funds...
Bohemian Manufacturing Company reported sales of $720,000 at the end of last year; but this year,...
Bohemian Manufacturing Company reported sales of $720,000 at the end of last year; but this year, sales are expected to grow by 8%. Bohemian expects to maintain its current profit margin of 20% and dividend payout ratio of 15%. The firm’s total assets equaled $400,000 and were operated at full capacity. Bohemian’s balance sheet shows the following current liabilities: accounts payable of $70,000, notes payable of $30,000, and accrued liabilities of $60,000. Based on the AFN (Additional Funds Needed) equation,...
Following is the balance sheet for the end of the year 2018 for Silver Spurs, Inc.:...
Following is the balance sheet for the end of the year 2018 for Silver Spurs, Inc.:                                                                  2018 2019             Current Assets                            $15,000    _______________             Net Fixed Assets                           20,000     _____________________________             Total Assets                                $35,000 __________________             Accounts Payable                        $ 2,000     ________________             Notes Payable                                1,000    ________________             Long-Term Debt                          10,000      ________________             Common Equity                     22,000                  Total Liabilities/Equity              $35,000 __________________    AFN    _________________             They have generated sales for 2018 of $35,000 resulting in net income of $15,000. Due to the difficulty associated with acquiring raw materials,...
As a firm grows, it must support increases in revenue with new investments in assets. The...
As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting, or sustainable, growth model helps a firm assess how rapidly it can grow, while maintaining a balance between its cash outflows (increases in noncash assets) and inflows (funds resulting from increases in liabilities or equity). Consider the following case of Fuzzy Button Clothing Company: Fuzzy Button Clothing Company has no debt in its capital structure and has $300,000,000 in assets. Its sales revenues...
Cold Duck Manufacturing Inc. reported sales of $775,000 at the end of last year, but this...
Cold Duck Manufacturing Inc. reported sales of $775,000 at the end of last year, but this year, sales are expected to grow by 9%. Cold Duck expects to maintain its current profit margin of 20% and dividend payout ratio of 30%. The following information was taken from Cold Duck’s balance sheet: Total assets: $475,000 Accounts payable: $65,000 Notes payable: $40,000 Accrued liabilities: $65,000 Based on the AFN equation, the firm’s AFN for the current year is _______ . A positively...
Green Caterpillar Garden Supplies Inc. reported sales of $775,000 at the end of last year; but...
Green Caterpillar Garden Supplies Inc. reported sales of $775,000 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 20% and dividend payout ratio of 10%. The firm’s total assets equaled $400,000 and were operated at full capacity. Green Caterpillar’s balance sheet shows the following current liabilities: accounts payable of $70,000, notes payable of $30,000, and accrued liabilities of $70,000. Based on the AFN...
Balance Sheet Calculations Fermer Company's balance sheet information at the end of 2016 and 2017 is...
Balance Sheet Calculations Fermer Company's balance sheet information at the end of 2016 and 2017 is as follows: 2016 2017 Total shareholders' equity $ (a) $100,700 Accumulated other comprehensive income 4,800 5,000 Current liabilities (b) 9,800 Intangible assets 12,600 12,000 Property, plant, and equipment (net) (c) 87,500 Current assets 21,000 (h) Total contributed capital 51,000 (i) Long-term liabilities (d) 30,200 Retained earnings 42,900 (j) Total assets (e) (k) Common stock, $10 par (f) (l) Working capital 9,900 10,200 Additional paid-in...
Vertical Analysis of Balance Sheet Balance sheet data for a company for the years ended December...
Vertical Analysis of Balance Sheet Balance sheet data for a company for the years ended December 31, 20Y2 and 20Y1, are shown below. 20Y2 20Y1 Current assets $ 1,500,000 $ 1,200,000 Property, plant, and equipment 12,500,000 10,800,000 Intangible assets 2,000,000 2,000,000 Current liabilities 1,000,000 850,000 Long-term liabilities 3,000,000 2,400,000 Common stock 2,500,000 2,500,000 Retained earnings 9,500,000 8,250,000 Prepare a comparative balance sheet for 20Y2 and 20Y1, stating each asset as a percent of total assets and each liability and stockholders’...
Blackwell Automotive’s balance sheet at the end of its most recent fiscal year shows the following...
Blackwell Automotive’s balance sheet at the end of its most recent fiscal year shows the following information: Flying Roos Corporation Balance Sheet as of December 31, 2014 Assets: Liabilities and Equity: Cash and marketable sec. $23,015 Accounts payable and accruals $163,257 Accounts receivable $141,258 Notes payable $21,115 Inventories $212,444 Total current liabilities $184,372 Total current assets $387,940 Long-term debt $168,022 Total liabilities $352,394 Net plant and equipment $711,256 Common stock $313,299 Goodwill and other assets $78,656 Retained earnings $512,159 Total...
2.Berman & Jaccor Corporation's current sales and partial balance sheet are shown below. This year Sales               ...
2.Berman & Jaccor Corporation's current sales and partial balance sheet are shown below. This year Sales                $          1,000   Balance Sheet: Assets                                     Cash                $          200      Short-term investments                     $          135      Accounts receivable               $          100      Inventories                  $          200          Total current assets            $          635      Net fixed assets                      $          450          Total assets             $          1,085   Sales are expected to grow by 10% next year. Assuming no change in operations from this year to next year, what are the projected total operating assets? Do not...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT