Consider the Balance Sheet of Hulas Metal Company (HMC) as on December 31,2023 given below: Assets Amounts (Rs) Liabilities & Equity Amount (Rs) Cash…
2024 · Solved Question with Answer
Consider the Balance Sheet of Hulas Metal Company (HMC) as on December 31,2023 given below:
| Assets | Amounts (Rs) | Liabilities & Equity | Amount (Rs) |
| Cash | 50,000 | Accounts payable | 60,000 |
| Accounts receivable | 70,000 | Accruals | 50,000 |
| Inventories | 130,000 | Notes payable | 40,000 |
| Total current assets | 250,000 | Total current liabilities | 150,000 |
| Net fixed assets | 250,000 | Common stock | 200,000 |
| Retained earnings | 150,000 | ||
| Total Assets | 500,000 | Total Liabilities & Equity | 500,000 |
Sales in 2023 were Rs 1,000,000 and which are expected to increase by 25 percent or to Rs 1,250,000 in 2024. All assets are utilized to full capacity. The profit margin of the HMC is 8 percent and the firm is expected to maintain a retention ratio of 40 percent.
a. What is the additional fund needed (AFN) of the HMC? Use AFN equation to estimate additional fund needed.
b. Prepare projected balance sheet of HMC for the year 2024 and verify the amount of AFN as calculated in part 'a.