Class 01 Discussion – Lemonade vs. Orange Juice
Review the following information for J’s Lemonade Stand and C’s Orange Juicery and then answer the discussion questions.
J’s Lemonade Stand
Fact J–1: On January 1, J’s Lemonade Stand was started on an initial investment of $50,000, provided by a group of investors.
Fact J–2: On January 1, J purchased a lemonade-making machine with $20,000 cash, and they expect to use the machine for five years.
Fact J–3: During the year, J purchased $25,000 of water, sugar, and lemons, all of which was converted into lemonade and sold.
Fact J–4: In exchange for the lemonade they sold, (a) J collected $35,000 of cash from customers; and (b) Some customers have not yet paid J in cash, but have promised to pay $5,000 by January 31 of the next year.
C’s Orange Juicery
Fact C–1: On January 1, C’s Orange Juicery was started on an initial investment of $100,000, provided by a group of investors.
Fact C–2: On January 1, C purchased a juicer for $40,000 cash, and they expect to use the machine for five years.
Fact C–3: During the year, C purchased $40,000 of water, sugar, and oranges, all of which was converted into orange juice and sold.
Fact C–4: In exchange for the orange juice they sold, (a) C collected $45,000 of cash from customers; and (b) Some customers have not yet paid C in cash, but have promised to pay $15,000 by January 31 of the next year.
Answer the following two questions in your discussion post.
1) Which company do you think performed better during the year? Give two reasons why you think so.
2) If you could have been one of the initial investors into one of these companies, providing $10,000 in cash investment, which company would you choose? Give two reasons why you chose that company.
