Answer:
ending cash balance = -$84,000
Since the profits are not enough to cover asset buildup, he will probably need to borrow money to cover them. Even though his company will be more profitable, its cash position will not be very healthy.
Explanation:
current sales $600,000
net assets = equity = $300,000
return = $600,000 x 8% = $48,000
next year's sales $1,200,000
net assets = equity = $600,000
return = $1,200,000 x 8% = $96,000
asset buildup = $600,000 - $300,000 = $300,000
ending cash balance = beginning cash balance + profit - asset buildup = $120,000 + $96,000 - $300,000 = -$84,000
