Sales double from $600,000 to $1,200,000 next year. Net assets (Assets Liabilities) will remain at 50...

 

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Sales double from $600,000 to $1,200,000 next year. Net assets (Assets Liabilities) will remain at 50 percent of sales and there is an 8 percent return on total sales. He will start the year with $120,000 in the bank and wishes to buy a Jaguar and townhouse. Does his optimistic outlook for his cash position appear to be correct? Compute his likely cash balance for the end of the year with beginning cash, plus profit, minus the asset buildup (change in total assets). Net Assets Buildup: Given: 4 5 Given: 16 Comment: 18 19 20 21 22 23 a) 24 b) 0.5 of Sales Beginning Cash: Sales Revenue: Return on Sales: Net Assets (Buildup): Ending Cash: Net Assets Buildup: Dividend Payout: Prev Yr 600,000 300,000 120,000 Sales Revenue: Return on Sales: Net Assets (Buildup): Dividend Payout: Effect on Cash Balance: P-3: Growth and financing (LO4) Galehouse Gas Stations Inc. expects sales to increase from $1,550,000 to $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. 0.5 of Sales 0.45 of Profits a. What effect will this growth have on funds? b. If the dividend payout is only 25 percent, what effect will this growth have on funds? Return on Sales: Current Yr Prev Yr 1,550,000 1,200,000 ??? Return on Sales: Curr Yr Beg Cash: Current Yr 1,750,000 0.08 120000 On Own 0.08 On Own Book Answer Makes No Sense! (Effect on Cash... if Div Payout value (above) is changed to.25) Sales double from $600,000 to $1,200,000 next year. Net assets (Assets Liabilities) will remain at 50 percent of sales and there is an 8 percent return on total sales. He will start the year with $120,000 in the bank and wishes to buy a Jaguar and townhouse. Does his optimistic outlook for his cash position appear to be correct? Compute his likely cash balance for the end of the year with beginning cash, plus profit, minus the asset buildup (change in total assets). Net Assets Buildup: Given: 4 5 Given: 16 Comment: 18 19 20 21 22 23 a) 24 b) 0.5 of Sales Beginning Cash: Sales Revenue: Return on Sales: Net Assets (Buildup): Ending Cash: Net Assets Buildup: Dividend Payout: Prev Yr 600,000 300,000 120,000 Sales Revenue: Return on Sales: Net Assets (Buildup): Dividend Payout: Effect on Cash Balance: P-3: Growth and financing (LO4) Galehouse Gas Stations Inc. expects sales to increase from $1,550,000 to $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. 0.5 of Sales 0.45 of Profits a. What effect will this growth have on funds? b. If the dividend payout is only 25 percent, what effect will this growth have on funds? Return on Sales: Current Yr Prev Yr 1,550,000 1,200,000 ??? Return on Sales: Curr Yr Beg Cash: Current Yr 1,750,000 0.08 120000 On Own 0.08 On Own Book Answer Makes No Sense! (Effect on Cash... if Div Payout value (above) is changed to.25) Sales double from $600,000 to $1,200,000 next year. Net assets (Assets Liabilities) will remain at 50 percent of sales and there is an 8 percent return on total sales. He will start the year with $120,000 in the bank and wishes to buy a Jaguar and townhouse. Does his optimistic outlook for his cash position appear to be correct? Compute his likely cash balance for the end of the year with beginning cash, plus profit, minus the asset buildup (change in total assets). Net Assets Buildup: Given: 4 5 Given: 16 Comment: 18 19 20 21 22 23 a) 24 b) 0.5 of Sales Beginning Cash: Sales Revenue: Return on Sales: Net Assets (Buildup): Ending Cash: Net Assets Buildup: Dividend Payout: Prev Yr 600,000 300,000 120,000 Sales Revenue: Return on Sales: Net Assets (Buildup): Dividend Payout: Effect on Cash Balance: P-3: Growth and financing (LO4) Galehouse Gas Stations Inc. expects sales to increase from $1,550,000 to $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. 0.5 of Sales 0.45 of Profits a. What effect will this growth have on funds? b. If the dividend payout is only 25 percent, what effect will this growth have on funds? Return on Sales: Current Yr Prev Yr 1,550,000 1,200,000 ??? Return on Sales: Curr Yr Beg Cash: Current Yr 1,750,000 0.08 120000 On Own 0.08 On Own Book Answer Makes No Sense! (Effect on Cash... if Div Payout value (above) is changed to.25) Sales double from $600,000 to $1,200,000 next year. Net assets (Assets Liabilities) will remain at 50 percent of sales and there is an 8 percent return on total sales. He will start the year with $120,000 in the bank and wishes to buy a Jaguar and townhouse. Does his optimistic outlook for his cash position appear to be correct? Compute his likely cash balance for the end of the year with beginning cash, plus profit, minus the asset buildup (change in total assets). Net Assets Buildup: Given: 4 5 Given: 16 Comment: 18 19 20 21 22 23 a) 24 b) 0.5 of Sales Beginning Cash: Sales Revenue: Return on Sales: Net Assets (Buildup): Ending Cash: Net Assets Buildup: Dividend Payout: Prev Yr 600,000 300,000 120,000 Sales Revenue: Return on Sales: Net Assets (Buildup): Dividend Payout: Effect on Cash Balance: P-3: Growth and financing (LO4) Galehouse Gas Stations Inc. expects sales to increase from $1,550,000 to $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. 0.5 of Sales 0.45 of Profits a. What effect will this growth have on funds? b. If the dividend payout is only 25 percent, what effect will this growth have on funds? Return on Sales: Current Yr Prev Yr 1,550,000 1,200,000 ??? Return on Sales: Curr Yr Beg Cash: Current Yr 1,750,000 0.08 120000 On Own 0.08 On Own Book Answer Makes No Sense! (Effect on Cash... if Div Payout value (above) is changed to.25)

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To determine the likely cash balance for the end of the year we need to calculate the profit for the ... View the full answer