Question on Additional Funds Needed

timer Asked: Dec 14th, 2015

Question description

Baxter Box Company's balance sheet showed the following amounts as of December 31st:
Assets $ Liabilities $
Cash 10 Accounts payable 15
Accounts Receivable 40 Accruals 5
Inventory 50 Notes Payable 20
Net Fixed Assets 100 Long Term debt 20
Common Stock 20
Retained Earnings 120
Total liabilities and equity 200
Last year the firm's sales were $2,000, and it had a profit margin of 10 percent and a dividend payout
ratio of 50 percent. Baxter Box operated its fixed assets at 80 percent of capacity during the year. The
company expects to increase next year's sales by 37.5 percent, to $2,750, but the profit margin is
expected to fall to 3 percent, and the dividend payout ratio is expected to rise to 60 percent. What is
Baxter Box's additional funds needed (AFN) for next year? (5 marks)

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