Company capital intensity ratio

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Reference no: EM131943985

1. Broussard Skateboard’s sales are expected to increase by 15% from $8millionin 2013 to$ 9.2 million in 2014. Its assets totaled $5million at the end of 2013. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2013, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals .Theafter- tax profit marginis forecasted to be 6%, and the forecasted pay out ratio is 40%. Use the AFN equation to forecast Broussard’s additiona lfunds needed for the coming year.

2. Refer to Problem 1. What would be the additional funds needed if the company’s year- end 2013 assets had been $7 million? Assume that all other numbers, including sales, are the same as in Problem12-1 and that the company is operating at full capacity. Why is this AFN different from the one you found in Problem 1? Is the company’s“ capital intensity” ratio the same or different?

Reference no: EM131943985

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