6-1. AFN EQUATION Carter Corporation's sales are expected to increase from $5 million in 2015 to $6 million in 2016, or by 20%. Its assets totaled $3 million at the end of 2015. Carter is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2015, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. Its profit margin is forecasted to be 5%, and the forecasted retention ratio is 30%. Use the AFN equation to forecast the additional funds Carter will need for the coming year.

6-1. AFN EQUATION Carter Corporation's sales are expected to increase from $5 million in 2015 to $6 million in 2016, or by 20%. Its assets totaled $3 million at the end of 2015. Carter is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2015, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. Its profit margin is forecasted to be 5%, and the forecasted retention ratio is 30%. Use the AFN equation to forecast the additional funds Carter will need for the coming year.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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