Problem
Aberdeen's 2022 fiscal year which was ended August 31, 2022. It is time to prepare the company's financial plan for the next fiscal year. As the financial analyst, you have been tasked to prepare Aberdeen's financial planning for the fiscal year ending August 31, 2023.
The most recent financial statements for the year ended August 31, 2022 are available for you to prepare the next year's financial plan. In addition, management has provided you the following assumptions which you should use in your financial planning work:
Management expects sales for 2023 to grow by 16 percent. (There is no plan to adjust the sales price. The sales amount increase is solely due to the increase in its sales volume.)
The firm was operating at 96 percent capacity for its 2022 fiscal year. When the capacity reaches 100%, additional investment in fixed assets is required to expand its capacity to meet the production demand. Each time a $100,000 investment in fixed assets will expand its capacity by 10% (hint, $100,000 investment in fixed assets increases its capacity by 10% of its current capacity; $200,000 investment will increase its capacity by 20%, etc.)
Interest expense will remain constant; the tax rate and the dividend pay-out rate will also remain constant.
Cost of sales, other expenses, current assets, and accounts payable change at the same rate with sales.
No change in debts (notes payable and long-term debt). No new equity is issued.
• Verify whether any additional investment in fixed assets is required for its 2023 fiscal year;