A Firm Has the Following Balance Sheet

question 19

Multiple Choice

A firm has the following balance sheet:
Cash:$ 20
Accounts payable:$ 20
Accounts receivable:20
Notes payable:40
Inventory:20
Long-term debt:80
Fixed assets:180
Common stock:80
Retained earnings:20
Total assets:$240
Total liabilities and equity:$240
Sales for the year just ended were $400,and fixed assets were used at 80 percent of capacity,but its current assets were at optimal levels.Sales are expected to grow by 5 percent next year,the profit margin is 5 percent,and the dividend payout ratio is 60 percent.How much additional funds (AFN) will be needed?

• A) $4.6
• B) −$6.4 (Surplus)
• C) $2.4
• D) −$4.6 (Surplus)
• E) $0.8

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Definitions:

Adding Capacity

The process of increasing the ability of a system or process to produce output, either by adding resources or optimizing current ones.

Robust Design

A design that can be produced to requirements even with unfavorable conditions in the production process.

Production

The process of creating, manufacturing, or producing goods and services.

Assembly

The process of putting together individual components to form a complete product or unit.