You Are the Owner of a Small Business Which Has

Multiple Choice

You are the owner of a small business which has the following balance sheet:
Current assets:$ 5,000
Accounts payable:$ 1,000
Net fixed assets:10,000
Accruals:1,000
Long-term debt:5,000
Common equity:8,000
Total assets:$15,000
Total:$15,000
Fixed and current assets are fully utilized,and the sales/assets and sales/spontaneous liabilities ratios will remain constant.Next year you expect sales to increase by 50 percent.You also expect to retain $2,000 of next year's earnings within the firm.What is next year's additional external funding requirement,i.e. ,what is your firm's AFN?

A) No additional funds are required.
B) $3,500
C) $4,500
D) $5,500
E) The answer depends on this year's sales level.