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:

Matching Law

A principle in psychology and behavioral economics that states the proportion of responses directed towards an option matches the proportion of reinforcements obtained from that option.

Prefrontal Cortex

The prefrontal cortex is a part of the brain located at the front of the frontal lobes; it is involved in complex behaviors including planning, decision making, and moderating social behavior.

Parietal Lobe

A region of the brain located at the upper back area in the skull, crucial for processing sensory information and spatial navigation.

Thalamus

A major part of the brain located at the center of the brain, functioning as a relay station for sensory and motor signals to the cerebral cortex.