Fuzzy Button Clothing Company reported sales of $820,000 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 23% and dividend payout ratio of 30%. The firm's total assets equaled $425,000 and were operated at full capacity. Fuzzy Button's balance sheet shows the following current liabilities: accounts payable of $75,000, notes payable of $45,000, and accrued liabilities of $70,000. Based on the AFN (Additional Funds Needed) equation, what is the firm's AFN for the coming year? -$152,076 -$127,744 -$121,661 -$109,495 A negatively-signed AFN value represents: 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. A shortage of internally generated funds that must be raised outside the company to finance the company's forecasted future growth. 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?) 90.3% 81.3% 85.8% 63.2%
Fuzzy Button Clothing Company reported sales of $820,000 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 23% and dividend payout ratio of 30%. The firm's total assets equaled $425,000 and were operated at full capacity. Fuzzy Button's balance sheet shows the following current liabilities: accounts payable of $75,000, notes payable of $45,000, and accrued liabilities of $70,000. Based on the AFN (Additional Funds Needed) equation, what is the firm's AFN for the coming year? -$152,076 -$127,744 -$121,661 -$109,495 A negatively-signed AFN value represents: 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. A shortage of internally generated funds that must be raised outside the company to finance the company's forecasted future growth. 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?) 90.3% 81.3% 85.8% 63.2%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Fuzzy Button Clothing Company reported sales of $820,000 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 23% and dividend payout ratio of 30%. The firm's total assets equaled $425,000 and were operated at
full capacity. Fuzzy Button's balance sheet shows the following current liabilities: accounts payable of $75,000, notes payable of $45,000, and accrued
liabilities of $70,000. Based on the AFN (Additional Funds Needed) equation, what is the firm's AFN for the coming year?
O -$152,076
O -$127,744
O -$121,661
O -$109,495
A negatively-signed AFN value represents:
OA point at which the funds generated within the firm equal the demands for funds to finance the firm's future expected sales
requirements.
O A surplus of internally generated funds that can be invested in physical or financial assets or paid out as additional dividends.
O A shortage of internally generated funds that must be raised outside the company to finance the company's forecasted future growth.
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?)
O 90.3%
O 81.3%
O 85.8%
O 63.2%
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