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Calculate the probable cash balance or deficit

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Question - Philip Morris is excited by the expectation that the sales of his clothing company double from $ 500,000 to $ 1 million the following year. Philip observes that the assets Net (assets - liabilities) will remain at 50% of sales. The company will post a 9% return on total sales. Our friend will start the year with $ 100,000 in the bank and already boasts of the two Mercedes that he will buy, as well as the vacations that it will happen in Europe. Is your optimistic view of the cash position correct?

Calculate the probable cash balance or deficit by the end of the year. Start with the balance initial cash and subtract increases in assets (equal to 50% of the increase in sales) and add up the profits.

Reference no: EM132941328

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