The X company sales are forecasted to increase from $1000 in 2005 to
$2000 in 2006. Here is the december 31,2005, balance sheet:

Cash                 $100  Accounts payable               $50
Accounts recievable  $200  Notes payable                  $150
Inventories          $200  Accurals                       $50
  Current assets     $500    Current liabilities          $250
Net fixed assets     $500  Long term debt                 $400
                           Common stock                   $100 
                           Retained earnings              $250

Total assets         $1000  Total liabilities and equity  $1000

The company's fixed assets were used to only 50 percent of capacity
during 2005, but its current assets were at their proper levels. All
assets except fixed assets increase at the same rate as sales, and
fixed assets would also increase at the same rate if the current
excess capacity did not exist.The company after-tax profit margin is
forecasted to be 5 percent, and its payout ratio will be 60 percent.
What is the companys additional funds needed (AFN) for the coming
year? Ignore financing feedback effects.

The answer is $360.  I have provided a link to an Excel spreadsheet
you can download to review the calculations.  I have also provided a
link to instructions on how to solve this type of problem (see page
4).

Sincerely,

Wonko

"Calculating 'Additional Funds Needed' (A.F.N.)" by Ken D. Duft,
Agribusiness Management, Washington State University (1992)
http://www.agribusiness-mgmt.wsu.edu/ExtensionNewsletters/1992/AFN.pdf

http://rapidshare.de/files/1598813/X_Company_Additional_Funds_Needed.xls.html

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Request for Answer Clarification by milenitka-ga on 06 May 2005 07:08 PDT

I have never used rapidshare and I don't know where to find the file.
what do I need to do?

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Request for Answer Clarification by milenitka-ga on 06 May 2005 07:34 PDT

Never mind I got it :)) Thanks!!!

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Clarification of Answer by wonko-ga on 06 May 2005 09:16 PDT

I am glad you were able to download the file.

Sincerely,

Wonko

You were very helpful.
Thank you!!!

$100.00

Everything but the FA double, including the cash, so 100 becomes 200,
therefore they need an addtional 100 - maybe