AFN EQUATION Carlsbad Corporation's sales are expected to increase from $5 million in 2016 to $6 million...

70.2K

Verified Solution

Question

Finance

AFN EQUATION
Carlsbad Corporation's sales are expected to increase from $5million in 2016 to $6 million in 2017, or by 20%. Its assetstotaled $4 million at the end of 2016. Carlsbad is at fullcapacity, so its assets must grow in proportion to projected sales.At the end of 2016, current liabilities are $1 million, consistingof $250,000 of accounts payable, $500,000 of notes payable, and$250,000 of accrued liabilities. Its profit margin is forecasted tobe 6%.
a Assume that the company pays no dividends.
Under these assumptions, what would be the additional funds neededfor the coming year? Write out your answer completely. For example,5 million should be entered as 5,000,000. Round your answer to thenearest cent.
$
b Why is this AFN different from the one when the company paysdividends?
Under this scenario the company would have a higher level ofretained earnings, which would reduce the amount of additionalfunds needed.
Under this scenario the company would have a higher level ofretained earnings, which would reduce the amount of assetsneeded.
Under this scenario the company would have a higher level ofspontaneous liabilities, which would reduce the amount ofadditional funds needed.
Under this scenario the company would have a lower level ofretained earnings, which would increase the amount of additionalfunds needed.
Under this scenario the company would have a lower level ofretained earnings, which would decrease the amount of additionalfunds needed.

Answer & Explanation Solved by verified expert

3.7 Ratings (549 Votes)

Answer a AFN Assets Sales Sales Accounts payable Accrued liabilities Sales x Sales Profit Margin Forecast Sales 1 dividend payout Sales 6 5 1 million 1000000 AFN 4000000 5000000 1000000 See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

AFN EQUATIONCarlsbad Corporation's sales are expected to increase from $5million in 2016 to $6 million in 2017, or by 20%. Its assetstotaled $4 million at the end of 2016. Carlsbad is at fullcapacity, so its assets must grow in proportion to projected sales.At the end of 2016, current liabilities are $1 million, consistingof $250,000 of accounts payable, $500,000 of notes payable, and$250,000 of accrued liabilities. Its profit margin is forecasted tobe 6%.a Assume that the company pays no dividends.Under these assumptions, what would be the additional funds neededfor the coming year? Write out your answer completely. For example,5 million should be entered as 5,000,000. Round your answer to thenearest cent.$b Why is this AFN different from the one when the company paysdividends?Under this scenario the company would have a higher level ofretained earnings, which would reduce the amount of additionalfunds needed.Under this scenario the company would have a higher level ofretained earnings, which would reduce the amount of assetsneeded.Under this scenario the company would have a higher level ofspontaneous liabilities, which would reduce the amount ofadditional funds needed.Under this scenario the company would have a lower level ofretained earnings, which would increase the amount of additionalfunds needed.Under this scenario the company would have a lower level ofretained earnings, which would decrease the amount of additionalfunds needed.