Philip Morris expects the sales for his clothing company to

Philip Morris expects the sales for his clothing company to be $540,000 next year. Philip notes that net assets (Assets Liabilities) will remain unchanged. His clothing firm will enjoy a 11 percent return on total sales. He will start the year with $140,000 in the bank.

What will Philip\'s ending cash balance be?

Solution

Answer

Expected Sales = 540000 $

Return on total sales = 11 %

Profit = 540000 * 11 %

         = 59400 $

Net Assets remain unchanged that means there is no addition to these element.

Calculation of Closing Cash balance -

                                           Opening Cash balance                      140000 $

                                                                (+) Profit                         59400 $

                                                      (-) Addition to asset                   (0)       $

                                                                                                     ____________

                                                      Closing Cash balance    209400 $