Question

Please calculate the values needed to forecast the sales, variable costs, fixed costs, and net income for the next year using the forecasting assumptions provided.

Then, determine the impact on the balance sheet by projecting the dividends paid and resulting impact on other components of the balance sheet.

Finally, determine the amount of Additional Funds needed in the next year.   

   This year          Next Year        Forecasting Assumption

  Sales                          100                    _____                Sales will grow 20%

‑ Variable Costs             50                     _____               Constant % of Sales

‑ Fixed Costs                 40                     ______            Remains same

= Net Income                 10                    _______           

  Dividends                     5                     ______                 Keep 50% Payout Ratio

Current Assets              60                   _____                Constant % of sales

Fixed Assets               100                   ______                Remains same

Total Assets               160                    _______             

Current Liabs.              20                  ______               Constant % of sales  

Long-term Debt           20                  _______             Remains same

Common Stock            20                  ______              Remains same

Retained Earns.          100                _______            

Tot Liabs & Eq          160                  _______

  

                        AFN = __________

Answer 1

   This year          Next Year        Forecasting Assumption

  Sales                          100                    _120____                

‑ Variable Costs             50                     _60____               Constant % of Sales

‑ Fixed Costs                 40                     _40_____            Remains same

= Net Income                 10                    __20_____           

  Dividends                     5                     ____10__                 Keep 50% Payout Ratio

Current Assets              60                   ____72_                Constant % of sales

Fixed Assets               100                   ___100___                Remains same

Total Assets               160                    ____172___             

Current Liabs.              20                  __24____               Constant % of sales  

Long-term Debt           20                  ___20____             Remains same

Common Stock            20                  ___20___              Remains same

Retained Earns.          100                ___108____            

Tot Liabs & Eq          160                  ___172____

  

  

Dividend 10 must be paid . HERE the impact on the balance sheet will be decrease in current assets by 10 and increase of long term debt BY 10

AFN = projected increase in assets - spotaneous increase in liabalites - any increase in retained earnings

= (172-160) - (172-160) - (108-100) = 8