In looking at AFN, how can profit margins be manipulated by management through certain actions
In looking at AFN, how can profit margins be manipulated by management through certain actions
Homework Answers
AFN stands for additional funds needed
AFN = Required increase in assets – Spontaneous increase in liabilities -Increase in retained earnings.
Increase in retained earning = (profit margin * New Sales level * (1-payout ratio))
Now AFN would be low if the profit margins are high, if the profit margin is high then there would be increase in retained earnings and there would less need for additional funds because internal funds are available. If the sales level is high then also the profit margin in absolute numbers would increase and will lead to increase in retained earnings. Dividends can be reduced also, if the payout ratio is low that means there is high retained earnings from profit margins.
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In looking at AFN, how can profit margins be manipulated by
management through certain actions
1. In looking at AFN, how can profit margins be manipulated by management through certain actions?
1. In looking at AFN, how can profit margins be manipulated by management through certain actions?
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looking for some help with this finance question thank
you!
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you!
eBook Problem Walk-Through Problem 12-01 AFN equation Broussard Skateboard's sales are expected to increase by 25% from $7.4 million in 2016 to $9.25 million in 2017. Its assets totaled $4 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2016, current liabilities were $1.4 million, consisting of $450,000 of accounts payable,...
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