Click here to read the eBook: The AFN Equation SALES INCREASE 2 million in sales

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Click here to read the eBook: The AFN Equation SALES INCREASE 2 million in sales during 2016, and its year-end total assets were $1.4 million. Also, at year end 2016, current liabilities were $500,000, consisting of 200,000 of notes payable, $200,000 of accounts payable, every $1.00 increase in sales. Paladin's profit margin is 4%, and its rete externally? write out your answer completely. For example, 25 million should be entered as 25 000 000 and $100,000 of accrued liabilities. Looking ahead to 2017, the company estimates that its assets must increase by $0.70 for ntion ratio is 60%. How large of a sales increase can the company achieve without having to raise funds m t round inter edate ca culations Re un r ars e·t there est

Explanation / Answer

S2016 = $2,000,000; A2016 = $1,500,000; CL2016 = $500,000;

NP2016 = $200,000; A/P2016 = $200,000; Accruals2016 = $100,000;

PM = 5%; d = 60%; A*/S0 = 0.75.

AFN = (A*/S0)deltaS - (L*/S0)deltaS - MS1(1 - d)

=0.75deltaS - (300,000/2,000,000)deltaS - (0.05)(S1)(1 - 0.6)

putting deltaS as (s1-s0) and s0=2,000,000

we get s1 =2,068,965.52

Sales can increase by $2,068,965.52 - $2,000,000 = $68,965.52 without additional funds being needed.

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