Financial management

Carlsbad Corporation’s sales are expected to increase from $5 million in 2016 to $6 million in 2017, or by 20%. Its assets totaled $4 million at the end of 2016. Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2016, 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 6%, and the forecasted retention ratio is 45%.

Use the AFN equation to forecast the additional funds Carlsbad will need for the coming year. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest cent.

Earleton Manufacturing Company has $3 billion in sales and $900,000,000 in fixed assets. Currently, the company’s fixed assets are operating at 85% of capacity. What level of sales could Earleton have obtained if it had been operating at full capacity? Write out your answer completely. Round your answer to the nearest whole number. $

What is Earleton’s target fixed assets/sales ratio? Round your answer to two decimal places. % If Earleton’s sales increase 35%, how large of an increase in fixed assets will the company need to meet its target fixed assets/sales ratio? Write out your answer


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