Fundamentals of Financial Manageme...
Fundamentals of Financial Manageme...
LONG-TERM FINANCING NEEDED At year-end 2015, total assets for Ambrose Inc. were $1 2 million and accounts payable were $375,000. Sales, which in 2015 were $2 5 million, are expected to increase by 25% in 2016. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Ambrose typically uses no current liabilities other than accounts payable. Common stock amounted to $425,000 in 2015, and retained earnings were $295,000. Ambrose plans to sell new common stock in the amount of $75,000. The firm’s profit margin on sales is 6%; 60% of earnings will be retained.
- a. What were Ambrose’s total liabilities in 2015?
- b. How much new long-term debt financing will be needed in 2016? (Hint: AFN − New stock = New long term debt.)
a.
To Determine: The total liabilities of Company AI in 2015.
Introduction: AFN is abbreviated as additional funds needed, is the measure of cash an organization must raise from outer sources to back the expansion in assets necessary to help expanded level of sales. It is additionally called as external financing needed (EFN).
Determine the total liabilities of Company AI in 2015
b.
To Determine: The new long-term debt financing needed in 2016.
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