Problem 12-2 AFN equation Broussard Skateboard\'s sales are expected to increase
ID: 2748751 • Letter: P
Question
Problem 12-2
AFN equation
Broussard Skateboard's sales are expected to increase by 15% from $7.0 million in 2013 to $8.05 million in 2014. Its assets totaled $5 million at the end of 2013. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2013, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 6%, and the forecasted payout ratio is 65%. What would be the additional funds needed? Do not round intermediate calculations. Round your answer to the nearest dollar.
$
Explanation / Answer
The detailes in calculation of retained eranings per the sales data given
The AFN and balance sheet deatils are worked out below:
Sales 8050000 Given Net Profit 483000 6% of Sales Since Net profit is 6% Dividend Payout 313950 65% of Net profit paid as dividends Retained Earnings 169050 Remaining net profit after payout