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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Faa855f26-dbba-49e1-97b9-e8f0d72372d5%2F3e81095e-ba77-403e-9850-bf6141470969%2Fwrkddg9_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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.
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