The Barnsdale Corporation has the following ratios: A0*/S0 = 1.6; L0*/S0 = 0.4; profit margin = 0.10; and dividend payout ratio = 0.45, or 45%. Sales last year were $100 million. suppose Barnsdale’s financial consultants report (1) that the inventory turnover ratio (sales/inventory) is 3, compared with an industry average of 4, and (2) that Barnsdale could reduce inventories and thus raise its turnover ratio to 4 without affecting its sales, profit margin, or other asset turnover ratios. Requirement: a. Under these conditions, use the AFN equation to determine the amount of additional funds Barnsdale would require during the 1st year if sales grow at a rate of 20% per year. Sample format: 1,111,111 b. Under these conditions, use the AFN equation to determine the amount of additional funds Barnsdale would require during the 2nd year if sales grow at a rate of 20% per year. Sample format: 1,111,111
The Barnsdale Corporation has the following ratios: A0*/S0 = 1.6; L0*/S0 = 0.4; profit margin = 0.10; and dividend payout ratio = 0.45, or 45%. Sales last year were $100 million. suppose Barnsdale’s financial consultants report (1) that the inventory turnover ratio (sales/inventory) is 3, compared with an industry average of 4, and (2) that Barnsdale could reduce inventories and thus raise its turnover ratio to 4 without affecting its sales, profit margin, or other asset turnover ratios.
Requirement:
a. Under these conditions, use the AFN equation to determine the amount of additional funds Barnsdale would require during the 1st year if sales grow at a rate of 20% per year.
Sample format: 1,111,111
b. Under these conditions, use the AFN equation to determine the amount of additional funds Barnsdale would require during the 2nd year if sales grow at a rate of 20% per year.
Sample format: 1,111,111
Step by step
Solved in 4 steps with 2 images
