finance

I need help bad.


You have been running your small business, Craft’s Boat Shop, for several years now and have been very successful.  You have come to the point where you expect sales to increase next year and want to be sure that you have enough assets available to support your sales. You also need to have the financing available to acquire those assets, if needed.

Accordingly, you have gathered the following data:

Craft’s Boat Shop 

Sales Last Year

$1,000,000

Assets at the End of Last Year

750,000

Accounts Payable

60,000

Notes Payable

60,000

Accruals

30,000

Profit Margin on Sales

5%

Dividend Payout

50%

Note: All figures are as of the end of last year

Required:

If you need $0.80 in assets for every $1.00 in sales, by how much can sales increase without obtaining additional outside financing?  HINT: Use the AFN formula.

I did this much:
750,000/1,000,000 (500,000)-90,000/1,000,000 (500,000)-(1,500,000) 50,000/1,000,000 (1.00)
= 0.750 (500,000)-0.090 (500,000)-1,500,000 (0.05)(1.00)
= 375,000-45,000-75,000
= 255,000
Please tell me where I went wrong? Thank you.

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asked by karen

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