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.

$538,000

Explanation:

EFN = [(assets/sales) x ($ Δ sales)] - [(liabilities/sales) x ($ Δ sales)] - [profit margin x forecasted sales x (1 - dividend payout)]

current sales = $5,000,000

change in sales = $1,000,000

assets $4,000,000

profit margin = 6%

1 - dividend payout = 45%

current liabilities that change in proportion to sales = $500,000

forecasted sales = $6,000,000

EFN = [($4,000,000/$5,000,000) x ($1,000,000)] - [($500,000/$5,000,000) x ($1,000,000)] - (6% x $6,000,000 x 0.45)

EFN = $800,000 - $100,000 - $162,000 = $538,000

its simple as this, microeconomics is the study of economics at an individual, group or company level, macroeconomics on the other hand, is the study of a national economy as a whole.

hope it =^-^=

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