Philip morris is excited because sales for his clothing

Reference no: EM13452224

Philip Morris is excited because sales for his clothing company are expected to double from $650,000 to $1,300,000 next year. Philip notes that net assets (Assets - Liabilities) will remain at 50 percent of Sales. His clothing firm will enjoy a 12 percent return on total sales. He will start the year with $250,000 in the bank and is already bragging about the two Mercedes he will buy and the European vacation he will take.

Compute his likely cash balance or deficit for the end of the year. Start with beginning cash and subtract the asset buildup (equal to 50 percent of the sales increase) and add in profit.

Does his optimistic outlook for his cash position appear to be correct?

Reference no: EM13452224

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