12-1) Broussard Skateboard’s sales are expected to increase by 15% from $8 million in 2013 to $9.2 million in 2014

12-1) Broussard Skateboard’s sales are expected to increase by 15% from $8 million in

2013 to $9.2 million in 2014. Its assets totaled $5 million 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. The after-tax profit margin is forecasted to be 6%, and the forecasted

payout ratio is 40%. Use the AFN equation to forecast Broussard’s additional funds

needed for the coming year.

(12-2) Refer to Problem 12-1. What would be the additional funds needed if the company’s yearend

2013 assets had been $7 million? Assume that all other numbers, including sales, are

the same as in Problem 12-1 and that the company is operating at full capacity. Why is

this AFN different from the one you found in Problem 12-1? Is the company’s “capital

intensity” ratio the same or different?