The Hudson River Line Company Has a Balance Sheet as of the End

question 5

Multiple Choice

The Hudson River Line Company has a balance sheet as of the end of the year as follows: $\begin{array}{|l|c|c|}\hline \text { Cash } & \$ 5,000 \text { Accounts Payable } & \$ 15,000 \\\hline \text { Accounts Receivable } & 20,000 \text { Notes Payable } & 10,000 \\\hline \text { Inventories } & 40,000 \text { Total Current Liab. } & 25,000 \\\hline \text { Total Current Assets } & \$ 65,000 \mid \text { Long-term Debt } & 30,000 \\\hline \text { Fixed Assets, net } & 50,000 \text { Stockholder's Equity } & 60,000 \\\hline \text { Total Assets } & \$ 115,000 \mid \text { Total Liabilities \& Equity } & \$ 115,000 \\\hline\end{array}$ Last year, the firm had sales of $148,750. This year the company expects sales to increase 25%, to generate earnings after tax of $16,000, and to pay a dividend of $5,000. Hudson operated its fixed assets at 85% capacity last year. What additional financing will be needed to support the sales increase?

• A) $2,125
• B) $4,625
• C) $1,500
• D) $375 surplus -- no financing needed.

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Definitions:

Play Stage

Mead’s first stage of social experience, in which young children imitate the activities of people around them.

Sense of Self

An individual's perception of their own identity and personal attributes, including self-awareness and self-esteem.

Role Taking

In symbolic interaction theory, the process of imaginatively occupying the position of another person and viewing the situation and the self from that person’s perspective; the process of imagining the other’s attitudes and anticipating that person’s responses.

Imaginatively Occupying

The process of mentally placing oneself in the situation or perspective of another.