Additional External Financing
You ; have been running your small business, Craft’s Boat Shop, for several years now ; and have been very successful. ; You have ; come to the point where you expect sales to increase next year and want to be ; sure that you have enough assets available to support your sales. You also need ; to have the financing available to acquire those assets, if needed.
Accordingly, ; you have gathered the following data:
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Craft’s Boat Shop ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; |
|
Sales Last Year |
$1,000,000 |
Assets at the End of Last Year |
750,000 |
Accounts Payable |
60,000 |
Notes Payable |
60,000 |
Accruals |
30,000 |
Profit Margin on Sales |
5% |
Dividend Payout |
50% |
Note: All figures are as of the end of last year
Required:
- If you need $0.80 in assets ; for every $1.00 in sales, by how much can sales increase without obtaining ; additional outside financing? ; HINT: Use ; the AFN formula.