In: Finance
Last year's sales = S0 |
$200,000 |
Sales growth rate = g |
40% |
Last year's total assets = A0* |
$135,000 |
Last year's profit margin = PM |
20.0% |
Last year's accounts payable |
$50,000 |
Last year's notes payable |
$15,000 |
Last year's accruals |
$20,000 |
Target payout ratio |
25.0% |
Last Year:
Saes = $200,000
Total Assets = $135,000
Profit Margin = 20.00%
Retention Ratio = 1 - Payout Ratio
Retention Ratio = 1 - 0.25
Retention Ratio = 0.75
Spontaneous Current Liabilities = Accounts Payable +
Accruals
Spontaneous Current Liabilities = $50,000 + $20,000
Spontaneous Current Liabilities = $70,000
Next Year:
Growth Rate = 40%
Sales = $200,000 * 1.40
Sales = $280,000
Net Income = Sales * Profit Margin
Net Income = $280,000 * 20.00%
Net Income = $56,000
Addition to Retained Earnings = Net Income * Retention
Ratio
Addition to Retained Earnings = $56,000 * 0.75
Addition to Retained Earnings = $42,000
Increase in Total Assets = $135,000 * 40.00%
Increase in Total Assets = $54,000
Increase in Spontaneous Current Liabilities = $70,000 *
40.00%
Increase in Spontaneous Current Liabilities = $28,000
Additional Funds Needed = Increase in Total Assets - Increase in
Spontaneous Current Liabilities - Addition to Retained
Earnings
Additional Funds Needed = $54,000 - $28,000 - $42,000
Additional Funds Needed = -$16,000