Question

Financial Analysis and Planning Part2 114 Philip Morris expects the sales for his clothing company to be $550,000 next rowth and nancing 04-4) 2. ear. 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's ending cash balance be? 3. Galehouse Gas Stations Inc. expects sales to increase from $1,550.000 to owth and ancing 4-4) $1,750,000 next year. Galehouse believes that net assets (Assets Liabilities) will represent 50 percent of sales. His firm has an 8 percent return on sales and pays 45 percent of profits out as dividends. a. What effect will this growth have on funds h. If the dividend payout is only 25 percent, what effect will this growth havo on funds? projections

Answer 1

Solution: Q2 workin Opening cash balance Less Asset build-up Add: Profit Ending cash balance 150000 0 66000 216000 550000* 12% Q3 a) Opening cash balance Less : Asset build-up Less Dividends Add : Profit Ending cash balance The fund will decrease by $23000 working (1750000-1550000)*0.5 140000*45% 1750000*8% -100000 63000 140000 -23000 Opening cash balance Less Asset build-up Less Dividends Add Profit Ending cash balance The fund will decrease by $5000 working (1750000-1550000)*0.5-100000 140000*25% 1750000*8% 35000 140000 5000