Reference no: EM132607583

As a financial analyst in a company, you need to prepare pro forma financial statements for 2019. your company has the following balance sheet as of December 31, 2018 ($ millions).

Cash $ 3.5 Accounts payable $ 11.0
Receivables 26.0 Notes payable 18.0
Inventory 58.0 Accruals 9.5
Total current assets $ 87.5 Total current liabilities $ 38.5
Net fixed assets 38.0 Mortgage loan 6.0
Common stock 15.0
Retained earnings 66.0
Total Assets $125.5 Total Liab. & Capital $125.5
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In 2018, Your company had sales of $380 million, net income of $12.5 million, and paid dividends of $5.0 million to common stockholders. The firm has been operating at full capacity. Assume that all ratios remain constant

For the year 2019, your company projects its sales to be $440 million (an increase of $60 million).

(1) Use the AFN general formula to compute the projected additional funds needed (AFN) for 2019;

(2) What does your estimated AFN figure tell you about your company's financing to support the sales increase in 2019?