Joan and Pat Clair Are Sisters Who Each Own and Operate

question 77

Essay

Joan and Pat Clair are sisters who each own and operate shops selling the latest electronics in neighboring towns.They decide to have a contest to see whose shop can be more profitable for the year.At year-end,Joan's records show sales of $210,000,cost of goods sold of $110,000,and operating expenses of $42,000.The records of Pat's shop reveal sales of $216,000,cost of goods sold of $124,000,and operating expenses of $38,000.Pat's shop also had other revenue of $6,000 received for allowing the shop to be used in taping a television show.Each sister claims to have won the contest.Provide explanations as to why each would think so,and then name the winner

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Definitions:

Cash Inflows

The total amount of money received by a company during a specific period, including revenues, investments, and financing.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment by calculating the present value of all cash inflows and outflows.

Rate Of Return

A financial ratio that calculates the profit or loss of an investment over a specified period, expressed as a percentage of the investment's initial cost.

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return.