Bohemian Manufacturing Company reported sales of $890,000 at the end of last year, but this year, sales are expected to grow by 7%. BMC expects to maintain its current profit margin of 20% and dividend payout ratio of 30%. The following information was taken from BMC’s balance sheet:
Total assets: $425,000
Accounts payable: $70,000
Accrued liabilities: $35,000
Notes payable: $80,000
Based on the AFN equation, the firm's AFN for the current year is.
A positively signed AFN value represents:.
A. A surplus of internally generated funds that can be invested in physical or financial assets or paid out as additional dividends.
B. A shortage of internally generated funds that must be raised outside the company to finance the company's forecasted future growth.
C. 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, Bohemian Manufacturing Company is thinking about raising its dividend payout ratio to satisfy shareholders. Bohemian could pay outof its earnings to shareholders without needing to raise any external capital.
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