Assume the Following Facts About a Firm The Firm's External Funding Requirement for Next Year Is
(Hint

question 143

Multiple Choice

Assume the following facts about a firm: $\begin{array}{lr}\text { Sales } _ {this year }&\$200,000\\\text { Net income }_ {this year }&\$30,000\\\text { Assets }_ {this year }&\$100,000\\\text { Current liabilities }_ {this year }&\$10,000\\\text { Anticipated growth rate }&10\%\\\text { Proposed dividend payout ratio }&40\%\end{array}$
The firm's external funding requirement for next year is
(Hint: You don't have to remember the EFR formula. Just realize that the funding requirement is the growth in assets less that in current liabilities less next year's retained earnings. A negative result means surplus funds are available.)

• A) $10,800
• B) ($28,800)
• C) ($10,800)
• D) $28,800

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Definitions:

Direct Write-Off Method

A method of accounting for bad debts that charges the amount of an outstanding account directly to the expense account at the time it is deemed uncollectible.

Net Realizable Value

The estimated selling price in the ordinary course of business minus the estimated costs of completion and the estimated costs necessary to make the sale.

Estimated Future Returns

Projections or forecasts about the potential gains or incomes from investments over a future period.

Sales Discounts

A reduction in the price of goods or services offered to customers, usually to prompt early payment or reward bulk purchases.