Fin 405- problems | Business & Finance homework help
Using this data we can then determine that in order to maintain their current finances throughout the next fiscal year they will require a total of ($50k – 0.1 x 50k) + 500k – (400 k+ 120k + 10 k) = 60 k in net new financing. This figure takes into account the firm’s expected profits (minus dividends paid out based on their payout ratio), projected asset balances at year end minus any beginning liabilities plus additional non-debt obligations such as accounts payable.
Overall it is important for businesses to consider all aspects of their financial situation when determining how much financing needs to be raised in order remain solvent going forward. In this particular example taking into consideration both profit forecasts along with starting and finishing balance sheet figures allowed us to get an accurate picture of what funds would need to be acquired over the course of the coming year.