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Chapter 2: 2BP (page 114)

Philip Morris expects the sales for his clothing company to be \(550,000 next year. Philip notes that net assets (Assets - Liabilities) will remain unchanged. His clothing firm will enjoy a 12 percent return on total sales. He will start the year with \)150,000 in the bank. What will Philip鈥檚 ending cash balance be?

Short Answer

Expert verified

The Cash Balance for the end of the year is $216,000

Step by step solution

01

Expected Profit earned

Profitearned=Expectedsales脳Rateofreturn=$550,000脳12%=$66,000

02

Cash balance at the end of the year

Particulars

Amount (S)

Opening cash balance

$150,000

Add: Profit earned

66,000

Closing Cash Balance

$216,000

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