Purchase Solution

AFN formula for Caters Corporation

Not what you're looking for?

Ask Custom Question

Please see attachment.

Caters Corporation's sales are expected to increase from $5 million in 2005 to $6million in 2006, or by 20percent. Its assets totaled $3million at the end of 2005. Carter is at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2005, current liabilities were $1 million, consisting of $250,000 of accounts payable, $5000,000 of notes payable, and $250,000 of accruals. The after tax profit margin is forecasted to be 5 percent, and the forecasted payout ration is 70 percent.

Use the AFN formula to forecast Carter's additional funds needed for the coming year.

Additional = Required Spontaneous Increase in
Funds = Increase - increase in - retained
Needed = in assets Liabilities earnings
AFN = (A*/So) ΔS - (L*/So) ΔS - MS1 (RR)

Attachments
Purchase this Solution

Solution Summary

The solution explains how to calculate the additional funds needed (AFN)

Solution Preview

Caters Corporation's sales are expected to increase from $5 million in 2005 to $6million in 2006, or by 20percent. Its assets totaled $3million at the end of 2005. Carter is at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2005, current liabilities were $1 million, consisting of $250,000 of accounts payable, $5000,000 of notes payable, and $250,000 of accruals. The after tax profit margin is forecasted ...

Purchase this Solution


Free BrainMass Quizzes
IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.