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AFN EQUATION Carisbad Corporations sales are expected to increase from 5 milion in 2016 to 56 milion in 2017. or by 20. stol
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Answer #1

Answer is 592000 (.592 Million)

calculations are given below

CARLSBAD CORPORATION AFN Equation
2016 2017 AFN = A*(ΔS/S0) - L*(ΔS/S0) - M(S1)(RR)
Sales(S) 5000000 6000000 AFN 592000
S0 5000000
S1 6000000
ΔS 1000000
Assets(A*) 4000000 A = A* (as company operates in full capacity)
ΔA
Current Liabilities 1000000
L* 500000 L* are the liabilities that increase spontaneously with sales. So it does not include bank loans/notes payable
Profit margin (M) 6%
Retention ratio (RR) 30%
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