Question

Fixed and current assets are fully utilized, and the sales/assets and sales/spontaneous liabilities ratios will remain constant. Next year you expect sales to increase by 50 percent. You also expect to retain $2,000 of next year's earnings within the firm. What is next year's additional external funding requirement, i.e., what is your firm's AFN?

Answer 1

$4,500

Step-by-step explanation:

AFN=Projected increase in assets – spontaneous increase in liabilities- any increase in RE

Fixed asset of 10,000 -3,500- 2,000

= $4,500

Therefore the next year's additional external funding requirement will be $4,500