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  3. 3. more on the afn (additional funds needed) equat

3. More on the AFN (Additional Funds Needed) equation Bohemian Manufacturing Company reported sales of...

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Accounting

image 3. More on the AFN (Additional Funds Needed) equation Bohemian Manufacturing Company reported sales of $890,000 at the end of last year, but this year, sales are expected to grow by 9%. Bohemian expects to maintain its current profit margin of 23% and dividend payout ratio of 20%. The following information was taken from Bohemian's balance sheet: Based on the AFN equation, the firm's AFN for the current year is A positively signed AFN value represents: a shortage of internally generated funds that must be raised outside the company to finance the company's forecasted future growth. a point at which the funds generated within the firm equal the demands for funds to finance the firm's future expected sales requirements. a surplus of internally generated funds that can be invested in physical or financial assets or paid out as additional dividends. Because of its excess funds, Bohemian Manufacturing Company is thinking about raising its dividend payout ratio to satisfy shareholders. Bohemian could pay out of its earnings to shareholders without needing to raise any external capital. (Hint: What can Bohemian increase its dividend payout ratio to before the AFN becomes positive?)

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