You Are the Owner of a Small Business Which Has

question 93

Multiple Choice

You are the owner of a small business which has the following balance sheet:
Current assets:$ 5,000
Accounts payable:$ 1,000
Net fixed assets:10,000
Accruals:1,000
Long-term debt:5,000
Common equity:8,000
Total assets:$15,000
Total:$15,000
Fixed and current assets are fully utilized,and the sales/assets and sales/spontaneous liabilities ratios will remain constant.Next year you expect sales to increase by 50 percent.You also expect to retain $2,000 of next year's earnings within the firm.What is next year's additional external funding requirement,i.e. ,what is your firm's AFN?

• A) No additional funds are required.
• B) $3,500
• C) $4,500
• D) $5,500
• E) The answer depends on this year's sales level.

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Definitions:

Statutorily Prescribed

Requirements or procedures determined and mandated by written law.

Easement By Necessity

An easement that is created when it is essential for the reasonable use of a property, typically for access.

Subdivided

Refers to a piece of land or structure that has been divided into smaller parts for sale, lease, or development.

Fixture

An item of personal property that has been attached to land or a building in such a way that it is considered legally to be a part of the property.