Assignment 16- Financial Planning and Forecasting Due on Dec 4 at 11 PM EST Blue
ID: 2794414 • Letter: A
Question
Assignment 16- Financial Planning and Forecasting Due on Dec 4 at 11 PM EST Blue Elk Manufacturing has the following end-of-year balance sheet: Blue Elk Manufacturing Balance Sheet For the Year Ended on December 31 Assets Current Assets: Liabilities Current Liabilities $150,000 Accounts payable 400,000 Accrued liabilities 350,000 Notes payable $900,000 Total Current Liabilities $250,000 150,000 100,000 $500,000 1,000,000 $1,500,000 Cash and equivalents Accounts recelvable Inventories Total Current Assets Net Fixed Assets: Long-Term Bonds Net plant and equipment (cost minus depreciation) $2,100,000 Total Debt Common Equity 800,000 700,000 $1,500,000 $3,000,000 Common stock Retained earnings Total Common Equity Total Assets $3,000,000 Total Liabilities and Equity The firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming year. In the year that just ended, Blue Elk Manufacturing generated $500,000 net income on sales of $13,000,000. The firm expects sales to increase by 16% this coming year and also expects to maintain its long-run dividend payout ratio of 35%. Suppose Blue Elk Manufacturing's assets are fully utilized. Use the additional funds needed (AFN) equation to determine the increase in total assets that is necessary to support Blue Elk Manufacturing's expected sales. O $456,000 $480,000 $384,000 0 Type here to searchExplanation / Answer
1) Increase in total assets = 3000000*16% = $ 480,000 Answer 2) Increase in assets supplied by spontaneous liabilities = (250000+150000)*16% = $ 64,000 Answer 3) Generation from operations added to retained earnings = 13000000*116%*3.85%*65% = $ 377,377 Answer Calculation of net income ratio: Ratio of net income to sales = 500000/13000000 = 3.85% AFN: AFN = Increase in assets-Increase in spontaneous liabilities-Addition to retained earnings $ 38,623 = 480000-64000-377377 =