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a. What were ABC’s total long-term debt and total liabilities in 2020? b. How much additional fund needed (AFN) in 2020?

a. What were ABC’s total long-term debt and total liabilities in 2020? b. How much additional fund needed (AFN) in 2020?

Essentials Of Investments
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
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At year-end 2019, ABC Inc.’s total assets were $1 million and its accounts payable were $325,000. Sales, which in 2019 were $2 million, are expected to increase by 30% in 2020. Total assets and accounts payable are proportional to sales, and that relationship will be maintained. ABC typically uses no current liabilities other than accounts payable. Common stock amounted to $375,000 in 2019, and retained earnings were $260,000. ABC has arranged to sell $60,000 of new common stock in 2020 to meet some of its financing needs. The remainder of its financing needs will be met by issuing new long-term debt at the end of 2020. (Because the debt is added at the end of the year, there will be no additional interest expense due to the new debt.) Its profit margin on sales is 5%, and 45% of earnings will be paid out as dividends.

a. What were ABC’s total long-term debt and total liabilities in 2020?
b. How much additional fund needed (AFN) in 2020?

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