Question

Additional Funds Needed

The Booth Company's sales are forecasted to double from $1,000 in 2018 to $2,000 in 2019. Here is the December 31, 2018, balance sheet:

Cash		$  100		Accounts payable		$   50
Accounts receivable		200		Notes payable		150
Inventories		200		Accruals		50
Net fixed assets		500		Long-term debt		400
				Common stock		100
				Retained earnings		250
Total assets		$1,000		Total liabilities and equity		$1,000

Booth's fixed assets were used to only 50% of capacity during 2018, but its current assets were at their proper levels in relation to sales. All assets except fixed assets must increase at the same rate as sales, and fixed assets would also have to increase at the same rate if the current excess capacity did not exist. Booth's after-tax profit margin is forecasted to be 4% and its payout ratio to be 70%. What is Booth's additional funds needed (AFN) for the coming year? Round your answer to the nearest dollar.

$  

Answer 1

Assuming Current Assets , Accounts Payable and Accruals are
increasing at the same rate with sales.
Increase in Sales =100%

Proforma Income Stetement	Amt $
for the Year 2019
Sales	2,000
After Tax Margin @4%=	80.00
Dividend Payout @70%	56.00
Addition to Retained Earning @30%=	24.00

Proforma Balance sheet
As on Dec 31,2019
Assets	Amt $	Liabilities & Equity	Amt $
Cash	200	Accounts Payable	100
Accounts Receivable	400	Notes Payable	150
Inventories	400	Accruals	100
Total Current Assets	1,000	AFN ( Balancing Amt)	376
Net Fixed Assets	500	Total Current Liabilities	726
		LT Debt	400
		Common Stock	100
		Retained Earning	274
Total Assets	1,500	Total Liabilities & Equity	1,500

So additional funds needed in the coming year is $376