2. More on the AFN (Additional Funds Needed) equation

Green Moose Industries reported sales of $720,000 at the end of last year, but this year, sales are expected to grow by 10%. Green Moose expects to maintain its current profit margin of 22% and dividend payout ratio of 25%. The following information was taken from Green Mooses balance sheet:

Total assets:	$425,000
Accounts payable:	$65,000
Notes payable:	$35,000
Accrued liabilities:	$80,000

Based on the AFN equation, the firms AFN for the current year is .

A positively signed AFN value represents:

A shortage of internally generated funds that must be raised outside the company to finance the companys forecasted future growth.

A surplus of internally generated funds that can be invested in physical or financial assets or paid out as additional dividends.

A point at which the funds generated within the firm equal the demands for funds to finance the firms future expected sales requirements.

Because of its excess funds, Green Moose Industries is thinking about raising its dividend payout ratio to satisfy shareholders. Green Moose could pay out of its earnings to shareholders without needing to raise any external capital.(Hint: What can Green Moose increase its dividend payout ratio to before the AFN becomes positive?)