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

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Carlsbad Corporation's sales are expected to increase from $5million in 2016 to $6 million in 2017, or by 20%. Its assetstotaled $3 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 3%.
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.
$

Why is this AFN different from the one when the company paysdividends?
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.
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.

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3.7 Ratings (585 Votes)

Additional Funds Needed AFN for the coming year Expected Next Year Sales 6000000 After Tax profit Margin After Tax profit Margin Expected Next Year Sales x Profit Margin 6000000 x 3 180000 Additions to Retained See Answer

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Carlsbad Corporation's sales are expected to increase from $5million in 2016 to $6 million in 2017, or by 20%. Its assetstotaled $3 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$250,000 of accrued liabilities. Its profit margin is forecasted tobe 3%.Assume that the company pays no dividends.Under these assumptions, what would be the additional funds neededfor the coming year? Write out your answer completely. For example,5 million should be entered as 5,000,000. Round your answer to thenearest cent.$Why is this AFN different from the one when the company paysdividends?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.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.