A firm currently has $2,000,000 in assets and $1,000,000 in accounts payable.If the firm expects sales to increase by 10% from last year to next year,then what is the estimated external funds required if the firm pays all of its net income to shareholders?

Question

Quizplus · Accepted Answer

EFR = DS (A/S)- DS (AP/S)- mS(1+g)(1-d),since d = 1,
EFR = DS (A/S)- DS (AP/S)= A (DS/S)- AP (DS/S)= Ag - APg = g(A - AP)
EFR = .1 (2,000,000 -1,000,000)= 100,000

A Firm Currently Has $2,000,000 in Assets and $1,000,000 in Accounts