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

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Finance

Carlsbad Corporation's sales are expected to increase from $5million in 2016 to $6 million in 2017, or by 20%. Its assetstotaled $5 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 7%, and the forecasted retention ratio is 45%. Use the AFNequation to forecast Carlsbad's additional funds needed for thecoming year. Write out your answer completely. For example, 5million should be entered as 5,000,000. Round your answer to thenearest cent.

$

Now assume the company's assets totaled $3 million at the end of2016. Is the company's \"capital intensity\" the same or differentcomparing to initial situation?
-Select-DifferentThe sameItem 2

Answer & Explanation Solved by verified expert
4.2 Ratings (575 Votes)
Carlsbads additional funds needed 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 700 420000    See Answer
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