Suppose Weatherfbrd^ financial consultants report (1) that the inventor) turnover ratio is sales/inventory = 5 times versus an industry average of 4 times and (2) that Weatherfbrd could reduce inventories and thus raise its turnover to 4 without affecting sales, the profit margin, or the other asset turnover ratios. Under these conditions, use the AFX formula to determine the amount of additional funds Weatherfbrd would require during each of the next 2 years if sales trrew at a rate of 20 percent per year. Carter Corporation's sales are expected to increase from $5 million in 2002 to $6 million in 2003. or by 20 percent. Its assets totaled S3 million at the end of 2002. Carter is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2002. current liabilities are Si million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and

$250,000 of accrued liabilities. The after-tax profit margin is forecasted to be 5 percent, and the forecasted retention ratio is 30 percent. Use this information to answer Problems 15-1. 15-2, and 15-3.

AppendixLO1