Exhibit 19.11 External Funding Needed (EFN) and Growth for Empire Enterprises The exhibit graphically illustrates Equation...

 

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Exhibit 19.11 External Funding Needed (EFN) and Growth for Empire Enterprises The exhibit graphically illustrates Equation 19.6. showing the connection between growth rate in sales and EFN. The horizontal axis plots the firm's projected growth rate, and the vertical axis plots EFN. The upward slope of the line illustrates how external financing increases with the growth rate, assuming that the dividend policy is held constant. External Funding Needed ($) $5.2 -$4.8- EFN = (Growth ratex Initial assets) - Addition to retained earnings A positive EFN means that the firm must find external funding to finance its growth. At some growth rate (9.6% for Empire Enterprises), EFN-0. Projected Growth Rate At low growth rates, EFN is negative (EFN < 0), and the firm has surplus funds. Exhibit 19.11 External Funding Needed (EFN) and Growth for Empire Enterprises The exhibit graphically illustrates Equation 19.6. showing the connection between growth rate in sales and EFN. The horizontal axis plots the firm's projected growth rate, and the vertical axis plots EFN. The upward slope of the line illustrates how external financing increases with the growth rate, assuming that the dividend policy is held constant. External Funding Needed ($) $5.2 -$4.8- EFN = (Growth ratex Initial assets) - Addition to retained earnings A positive EFN means that the firm must find external funding to finance its growth. At some growth rate (9.6% for Empire Enterprises), EFN-0. Projected Growth Rate At low growth rates, EFN is negative (EFN < 0), and the firm has surplus funds. Exhibit 19.11 External Funding Needed (EFN) and Growth for Empire Enterprises The exhibit graphically illustrates Equation 19.6. showing the connection between growth rate in sales and EFN. The horizontal axis plots the firm's projected growth rate, and the vertical axis plots EFN. The upward slope of the line illustrates how external financing increases with the growth rate, assuming that the dividend policy is held constant. External Funding Needed ($) $5.2 -$4.8- EFN = (Growth ratex Initial assets) - Addition to retained earnings A positive EFN means that the firm must find external funding to finance its growth. At some growth rate (9.6% for Empire Enterprises), EFN-0. Projected Growth Rate At low growth rates, EFN is negative (EFN < 0), and the firm has surplus funds.

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The image shows the relationship between a firms projected growth rate in sales and its external fun... View the full answer