You have a bike store. Your assets consist of $10,400 in inventory, $1,000 in equipment (phones, computers, etc.) and $600 cash. You are capitalized with $10,000 owners equity and $2,000 debt at 6%. Assume your only variable cost are the bikes you purchase from the manufacturer, $60/bike. Your fixed costs total $2500.

During the year you purchased 240 bikes and sold them at $80/bike. But you only paid for half the bikes you bought, the rest were sold to you on credit. What is your ROE for the year? What does your balance sheet look like at the end of the year?

You took out all the profits. Perform the net change in cash calculations for the year. What does your new balance sheet look like at the end of the year?