Answer Happy

Fuzzy Button Clothing Company reported sales of $775,000 at the
end of last year; but this year, sales are expected to grow by 8%.
Fuzzy Button expects to maintain its current profit margin of 20%
and dividend payout ratio of 25%. The firm’s total assets equaled
$475,000 and were operated at full capacity. Fuzzy Button’s balance
sheet shows the following current liabilities: accounts payable of
$70,000, notes payable of $25,000, and accrued liabilities of
$75,000. Based on the AFN (Additional Funds Needed) equation, what
is the firm’s AFN for the coming year?
-$99,150
-$89,235
-$109,065
-$128,895
A negatively-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 surplus of internally generated funds that can be invested in
physical or financial assets or paid out as additional
dividends.
A point at which the funds generated within the firm equal the
demands for funds to finance the firm’s future expected sales
requirements.
Because of its excess funds, Fuzzy Button is thinking about
raising its dividend payout ratio to satisfy shareholders. What
percentage of its earnings can Fuzzy Button pay 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?)
84.2%
63.2%
58.9%
75.8%