Fuzzy Button Clothing Company reported sales of $775,000 at the end of last year, but this year, sales are expected to grow by 7%. Fuzzy Button expects to maintain its current profit margin of 24% and dividend payout ratio of 25%. The following information was taken from Fuzzy Button’s balance sheet:
Total assets: $500,000
Accounts payable: $75,000
Notes payable: $40,000
Accrued liabilities: $80,000
Based on the AFN equation, the firm’s AFN for the current year is-$125,115 .
A positively signed AFN value represents:
a shortage of internally generated funds that must be raised outside the company to finance the company’s forecasted future growth.
a point at which the funds generated within the firm equal the demands for funds to finance the firm’s future expected sales requirements.
a surplus of internally generated funds that can be invested in physical or financial assets or paid out as additional dividends.
Because of its excess funds, Fuzzy Button Clothing Company is thinking about raising its dividend payout ratio to satisfy shareholders. Fuzzy Button could pay out of its earnings to shareholders without needing to raise any external capital. (Hint: What can Fuzzy Button increase its dividend payout ratio to before the AFN becomes positive?)
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Ch 12: Assignment - Corporate Valuation and ... 0 X Average / 3 ditional Funds Needed) equation ompany reported sales of $775,000 at the end of last year, but this year, sales are 24% and dividend payout ratio of 25%. The following information was taken from $500,000 $75,000 $40,000 : $80,000 Lion, the firm's AFN for the current year is value represents: of internally generated funds that must be raised outside the company to finance t hich the funds generated within the firm equal the demands for funds to finance th internally generated funds that can be invested in physical or financial assets or p inds, Fuzzy Button Clothing Company is thinking about raising its dividend payout ngs to shareholders without needing to raise any external capital. (Hint: What can