Serg8y55
Nov 10, 2014, 04:15 PM
Galehouse Gas Stations, Inc. expects sales to increase from $1,500,000 to $1,700,000 next year. Mr. Galehouse believes that net assets (Assets – Liabilities) will represent 70 percent of sales. His firm has a 10 percent return on sales and pays 40 percent of profits out as dividends. (LO4)
a. What effect will this growth have on funds?
It is evident that there's cash increase of $105,000, i.e. profit minus dividends paid ($170,000 - $68,000). Net assets is $1,190,000.
What is not clear to me is whether this amount be added to the firm' balance sheet as a cash component of the growth?
Thanks
a. What effect will this growth have on funds?
It is evident that there's cash increase of $105,000, i.e. profit minus dividends paid ($170,000 - $68,000). Net assets is $1,190,000.
What is not clear to me is whether this amount be added to the firm' balance sheet as a cash component of the growth?
Thanks