Carlsbad Corporation’s sales are expected to increase from $5 millionin 2018 to $6 million in 2019, or by 20%. Its assets totaled $3 million at the end of 2018.Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At theend of 2018, 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 forecastedto be 3%, and the forecasted retention ratio is 30%. Use the AFN equation to forecast theadditional funds Carlsbad will need for the coming year.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Carlsbad Corporation’s sales are expected to increase from $5 million
in 2018 to $6 million in 2019, or by 20%. Its assets totaled $3 million at the end of 2018.
Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At the
end of 2018, 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 3%, and the forecasted retention ratio is 30%. Use the AFN equation to forecast the
additional funds Carlsbad will need for the coming year.

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