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Green Caterpillar Garden Supplies Inc. reported sales of $820,000 at the end of last year,...

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Accounting

image Green Caterpillar Garden Supplies Inc. reported sales of $820,000 at the end of last year, but this year, sales are expected to grow by 8%. Green Caterpillar expects to maintain its current profit margin of 22% and dividend payout ratio of 30%. The following information was taken from Green Caterpillar'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 surplus of internally generated funds that can be invested in physical or financial assets or paid out as additional dividends. A point at which the funds generated within the firm equal the demands for funds to finance the firm's future expected sales requirements. Because of its excess funds, Green Caterpillar Garden Supplies Inc. is thinking about raising its dividend payout ratio to satisfy shareholders. Green Caterpillar could pay out of its earnings to shareholders without needing to raise any external capital.(Hint: What can Green Caterpillar increase its dividend payout ratio to before the AFN becomes positive?)

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