Recommendation

Chemalite had a promising first year and will likely continue to make profits for its shareholders over the next five years.

Problem Statement

The first year of business is important for predicting the future success of a company. The aim of the memo is to analyze the financial data from Chemalite and make a recommendation on the prospects of holding investments in Chemalite.

Key Points

• Zero liabilities
• Positive net income
• Negative cash flow from operating activities
• Cash invested in business
• Falling bank account balance
• Start up expenses already incurred
• Net income understates potential of business
• Lifetime of patent

Zero liabilities. Chemalite financed all of its start up costs through money contributed by the initial investors. Furthermore, it did not need any outside financing for operations during its first year. Therefore, the only claims on Chemalite’s assets are the investors.

Positive net income.......

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Title: Chemalite Solution
Approximate Word Count: 602
Approximate Pages: 3 (250 words per double-spaced page)

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