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e. $2,000 Clear my choice The AHAI Company's balance sheet of December 31, 2018 is given below: Sa ...
e. $2,000 Clear my choice The AHAI Company's balance sheet of December 31, 2018 is given below: Sales during the past year were $1,000, and they are expected to increase to $2,000 during 2019 . AHAl's fixed assets were used to 60% of capacity during 2018 , but its current assets were at their proper levels. All assets except fixed assets increase at the same rate as sales, and fixed assets would also increase at the same rate if the current excess capacity did not exist. Assume that AHAI's profit margin will remain constant at 4.25 percent and that the company will continue to pay out 40 percent of its earnings as dividends. What amount of additional funds (AFN) will be needed during the next year assuming the company would use up the excess capacity before adding fixed assets? a. $6 b. $7 c. $40 d. $5 e. $8
Answer :To calculate the additional funds needed (AFN) for the next year, we need to consider the changes in the company's balance sheet accounts based on the given information.
First, let's calculate the increase in sales:
Sales in 2018 = $1,000
Sales in 2019 = $2,000
Increase in sales = $2,000 - $1,000 = $1,000Please refer above answer