Eli Lilly is very excited because sales for his nursery and plant compny are expected to double from $600.000 to 41,200,000 next year. Eli notes that net assets (Assets-Liabilities) will remain at 50 percent of sales. His firm will enjoy an 8 percent return on total sales. He will start the year with $120,000 in the bank and is bragging about the Jaguar and luxury townhome he will buy. Does his optimistic outlook for his cashposition appear to be correct? Compute his likely cash balance or deficit for the end of the year. Start with the beginning cash and subtract the asset buildup ( equal to 50 percent of the sales increase) and add in the profit.
Eli Lilly is very excited because sales for his nursery and plant compny are expected to double from $600.000 to 41,200,000 next year. Eli notes that net assets (Assets-Liabilities) will remain at 50 percent of sales. His firm will enjoy an 8 percent return on total sales. He will start the year with $120,000 in the bank and is bragging about the Jaguar and luxury townhome he will buy. Does his optimistic outlook for his cashposition appear to be correct? Compute his likely cash balance or deficit for the end of the year. Start with the beginning cash and subtract the asset buildup ( equal to 50 percent of the sales increase) and add in the profit.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Eli Lilly is very excited because sales for his nursery and plant compny are expected to double from $600.000 to 41,200,000 next year. Eli notes that net assets (Assets-Liabilities) will remain at 50 percent of sales. His firm will enjoy an 8 percent return on total sales. He will start the year with $120,000 in the bank and is bragging about the Jaguar and luxury townhome he will buy. Does his optimistic outlook for his cashposition appear to be correct? Compute his likely cash balance or deficit for the end of the year. Start with the beginning cash and subtract the asset buildup ( equal to 50 percent of the sales increase) and add in the profit.
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