Decker Enterprises
Below Are the Simplified Current and Projected Financial

question 12

Multiple Choice

Decker Enterprises
Below are the simplified current and projected financial statements for Decker Enterprises. All of Decker's assets are operating assets. All of Decker's current liabilities are operating li abilities.
$\begin{array} { l c r } \text { Income statement } & \text { Current} & \text { Projected } \\ \text { Sales } & \text { na } & 1,500 \\ \text { Costs } & \text { na } & 1,080 \\ \text { Profit before tax } & \text { na } & 420 \\ \text { Taxes } ( 25 \% ) & \text { na } &\underline{ 105} \\ \text { Net income } & \text { na } & 315 \\ \text { Dividends } & \text { na } & 95 \end{array}$
$\begin{array} { l r r l r r } \text { Balance sheets } & \text { Current } & \text { Projected } & & \text { Current } & \text { Projected } \\ \text { Current assets } & 100 & 115 & \text { Current liabilities } & 70 & 81 \\ \text { Net fixed assets } & 1,200 & 1,440 & \text { Long-term debt } & 300 & 360 \\ & & & \text { Common stock } & 500 & 500 \\ & & & \text { Retained earnings } & 430 & 650 \end{array}$
-If Decker had a financing surplus, it could remedy the situation by

• A) borrowing on its line of credit.
• B) issuing more common stock.
• C) reducing its dividend.
• D) borrowing from its retained earnings
• E) paying a special dividend

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Definitions:

Deadweight Loss

describes a loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or is distorted by external factors like taxes or subsidies.

Demand Curve

represents the relationship between the price of a good and the quantity of that good consumers are willing to purchase.

Monopoly Power

Monopoly Power describes the ability of a company or entity to control the price and supply of a product or service, due to the lack of significant competition.

Lump-Sum Payment

A single payment made at a particular time, as opposed to multiple payments over time.