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Assets Current Assets: Cash and equivalents Accounts receivable Inventories Total Assets $150,000 400,000 350,000 $900,000 Total Current Assets Net Fixed Assets: Long-Term Bonds Net plant and equipment(cost minus depreciation) $2,100,000 Total Debt Common Equity Common stock Retained earnings Total Common Equity $3,000,000 Total Liabilities and Equity Liabilities Current Liabilities: Accounts payable Accrued liabilities Ⓒ$648,000 O $594,000 $540,000 O $486,000 Notes payable Total Current Liabilities O $72,000 O $86,400 O $64,800 O $79,200 $250,000 150,000 100,000 $500,000 1,000,000 $1,500,000 The firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming year. In the year that just ended, Cold Duck Manufacturing Inc. generated $300,000 net income on sales of $13,500,000. The firm expects sales to increase by 18% this coming year and also expects to maintain its long-run dividend payout ratio of 40%. 800,000 700,000 $1,500,000 $3,000,000 Suppose Cold Duck Manufacturing Inc.'s assets are fully utilized. Use the additional funds needed (AFN) equation to determine the increase in total assets that is necessary to support Cold Duck Manufacturing Inc.'s expected sales. When a firm grows, some liabilities grow spontaneously along with sales. Spontaneous liabilities are a source of capital that the firm will generate internally, so they reduce the need for external capital. How much of the total increase in assets will be supplied by spontaneous liabilities for Cold Duck Manufacturing Inc. this year?

Assets Current Assets: Cash and equivalents Accounts receivable Inventories Total Assets $150,000 400,000 350,000 $900,000 Total Current Assets Net Fixed Assets: Long-Term Bonds Net plant and equipment(cost minus depreciation) $2,100,000 Total Debt Common Equity Common stock Retained earnings Total Common Equity $3,000,000 Total Liabilities and Equity Liabilities Current Liabilities: Accounts payable Accrued liabilities Ⓒ$648,000 O $594,000 $540,000 O $486,000 Notes payable Total Current Liabilities O $72,000 O $86,400 O $64,800 O $79,200 $250,000 150,000 100,000 $500,000 1,000,000 $1,500,000 The firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming year. In the year that just ended, Cold Duck Manufacturing Inc. generated $300,000 net income on sales of $13,500,000. The firm expects sales to increase by 18% this coming year and also expects to maintain its long-run dividend payout ratio of 40%. 800,000 700,000 $1,500,000 $3,000,000 Suppose Cold Duck Manufacturing Inc.'s assets are fully utilized. Use the additional funds needed (AFN) equation to determine the increase in total assets that is necessary to support Cold Duck Manufacturing Inc.'s expected sales. When a firm grows, some liabilities grow spontaneously along with sales. Spontaneous liabilities are a source of capital that the firm will generate internally, so they reduce the need for external capital. How much of the total increase in assets will be supplied by spontaneous liabilities for Cold Duck Manufacturing Inc. this year?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Assets Current Assets: Cash and equivalents Accounts receivable Inventories Total Assets Total Current Assets Net Fixed Assets: Net plant and equipment(cost minus depreciation) $2,100,000 Cold Duck Manufacturing Inc. Balance Sheet For the Year Ended on December 31 Liabilities Current Liabilities: $150,000 400,000 350,000 $900,000 O $648,000 O $594,000 O $540,000 O $486,000 $3,000,000 O $72,000 O $86,400 O $64,800 O $79,200 Accounts payable Accrued liabilities Notes payable Total Current Liabilities Long-Term Bonds Total Debt Common Equity Common stock Retained earnings Total Common Equity $1,500,000 Total Liabilities and Equity $3,000,000 $250,000 150,000 100,000 $500,000 The firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming year. In the year that just ended, Cold Duck Manufacturing Inc. generated $300,000 net income on sales of $13,500,000. The firm expects sales to increase by 18% this coming year and also expects to maintain its long-run dividend payout ratio of 40%. Suppose Cold Duck Manufacturing Inc.'s assets are fully utilized. Use the additional funds needed (AFN) equation to determine the increase in total assets that is necessary to support Cold Duck Manufacturing Inc.'s expected sales. 1,000,000 $1,500,000 800,000 700,000 When a firm grows, some liabilities grow spontaneously along with sales. Spontaneous liabilities are a source of capital that the firm will generate internally, so they reduce the need for external capital. How much of the total increase in assets will be supplied by spontaneous liabilities for Cold Duck Manufacturing Inc. this year? Given the preceding information, Cold Duck Manufacturing Inc. is expected to generate retained earnings. According to the AFN equation and projections for Cold Duck Manufacturing Inc., the firm's AFN is $ In addition, Cold Duck Manufacturing Inc. is expected to generate net income this year. The firm will pay out some of its earnings as dividends but will retain the rest for future asset investment. Again, the more a firm generates internally from its operations, the less it will have to raise externally from the capital markets. Assume that the firm's profit margin and dividend payout ratio are expected to remain constant. from operations that will be added to
Transcribed Image Text:Assets Current Assets: Cash and equivalents Accounts receivable Inventories Total Assets Total Current Assets Net Fixed Assets: Net plant and equipment(cost minus depreciation) $2,100,000 Cold Duck Manufacturing Inc. Balance Sheet For the Year Ended on December 31 Liabilities Current Liabilities: $150,000 400,000 350,000 $900,000 O $648,000 O $594,000 O $540,000 O $486,000 $3,000,000 O $72,000 O $86,400 O $64,800 O $79,200 Accounts payable Accrued liabilities Notes payable Total Current Liabilities Long-Term Bonds Total Debt Common Equity Common stock Retained earnings Total Common Equity $1,500,000 Total Liabilities and Equity $3,000,000 $250,000 150,000 100,000 $500,000 The firm is currently in the process of forecasting sales, asset requirements, and required funding for the coming year. In the year that just ended, Cold Duck Manufacturing Inc. generated $300,000 net income on sales of $13,500,000. The firm expects sales to increase by 18% this coming year and also expects to maintain its long-run dividend payout ratio of 40%. Suppose Cold Duck Manufacturing Inc.'s assets are fully utilized. Use the additional funds needed (AFN) equation to determine the increase in total assets that is necessary to support Cold Duck Manufacturing Inc.'s expected sales. 1,000,000 $1,500,000 800,000 700,000 When a firm grows, some liabilities grow spontaneously along with sales. Spontaneous liabilities are a source of capital that the firm will generate internally, so they reduce the need for external capital. How much of the total increase in assets will be supplied by spontaneous liabilities for Cold Duck Manufacturing Inc. this year? Given the preceding information, Cold Duck Manufacturing Inc. is expected to generate retained earnings. According to the AFN equation and projections for Cold Duck Manufacturing Inc., the firm's AFN is $ In addition, Cold Duck Manufacturing Inc. is expected to generate net income this year. The firm will pay out some of its earnings as dividends but will retain the rest for future asset investment. Again, the more a firm generates internally from its operations, the less it will have to raise externally from the capital markets. Assume that the firm's profit margin and dividend payout ratio are expected to remain constant. from operations that will be added to
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