1. Use the AFN formula to forecast Carter's additional funds needed for the coming year.
2. What would be the additional funds needed if the company's year-end 2006 assets had been $4 million? Assume that all other numbers are the same. Why is this AFN different from the one you found in given Problem? Is the company's "capital intensity" the same or different?
Problem :
Define each of the following terms:
a. Operating plan; financial plan; sales forecast
b. Pro forma financial statement; percent of sales method
c. Spontaneously generated funds
d. Additional funds needed (AFN); AFN formula; capital intensity ratio
e. Lumpy assets.