Suppose That Runner Industries Currently Has the Balance Sheet Shown

question 12

Multiple Choice

Suppose that Runner Industries currently has the balance sheet shown as follows, and that sales for the year just ended were $5 million. The firm also has a profit margin of 10 percent, a retention ratio of 20 percent, and expects sales of $7 million next year. If fixed assets have enough capacity to cover the increase in sales and all other assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth?
$$\begin{array} { l c l r r } \text { Assets } && { \text { Liabilities and Equity } } \\\text { Current Assets } & \$ 1,500,000 & \text { Current Liabilities } & \$ 600,000 \\\text { Fixed Assets } & 3,000,000 & \text { Long-tem Debt } & 1,400,000 \\& & \text { Equity } & 2,500,000 \\\text { Total Assets } & \$ 4,500,000 & \text { Total Liabilities ard Equity } & \$ 4,500,000\end{array}$$

Recognize the necessity of documenting petty cash transactions and reconciling checking accounts.

Comprehend the process and importance of bank reconciliations.

Understand procedural documents involved in purchasing and cash management processes.

Recognize the accounting treatment of petty cash adjustments and cash over or short situations.

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Definitions:

Null Hypothesis

The proposition that observed differences among specific populations are attributed to errors in sampling or experimentation, hence indicating no major divergence.

Level Of Significance

The threshold chosen for deciding whether an observed effect is statistically significant, usually denoted by alpha.

Hypotheses

Plural form of hypothesis, which are propositions or statements made for the sake of argument that are tested through research and experimentation.

Significance Level

The probability of rejecting the null hypothesis when it is actually true, often denoted by alpha and used as a threshold in hypothesis testing.