1. Financial Forecasting (% of Sales Method). For this and the next 5 questions. At the end of 2013, total assets for Neringa Tours were $1,200,000, of which current assets were $200,000. The firm’s accounts payable were $375,000. Sales in 2013 were $2,500,000, and are expected to increase by 40% in 2014. Neringa Tours has no current liabilities other than accounts payable, which varies spontaneously with sales. In 2013, common stock was $425,000, and retained earnings balance was $295,000. The company plans to raise new common stock in the amount of $75,000. The firm’s net profit margin is 6%. Dividend payout ratio is 40%. The firm is operating at less than full capacity and does not plan to increase its fixed assets going forward. However current assets will vary directly with sales. Given the projected increase in sales, what will be the new level of TOTAL ASSETS in 2014? Hint: Please review the video on Financial Planning.
2. Calculate the firm’s TOTAL LIABILITIES (i.e. total debt) in 2013. Recall that TA = D + E.
3. Recall that current liabilities vary directly with sales. How much in total debt is the firm expecting for the year 2014?
4. Calculate the total common equity balance expected for 2014
5. Calculate the additional financing needed (AFN) for 2014