Great Subs Believes It Can Increase Sales by 50% Without

question 17

Multiple Choice

Great Subs believes it can increase sales by 50% without any increase in net fixed assets.Earnings after tax are expected to be $2,000.The company pays no dividends.What additional financing will Subs need to finance this growth? Subs' balance sheet currently is as follows:
$$\begin{array} { | l | r | l | r | } \hline \text { Cash } & \mathbf { 2 , 5 0 0 } & \text { Accaunts Payahle } & \text { 5,600 } \\\hline \text { Accaunts Rec. } & 4,400 & \text { Nater Payable } & 10,000 \\\hline \text { Inventory } & 6,000 & \text { Lang-term Debt } & 15,000 \\\hline \text { Fixed As5ets, net } & 47,700 & \text { Stockholde's Equity } & 30,000 \\\hline & \mathbf { 8 0 , 6 0 0 } & & \mathbf { 3 0 , 6 0 0 } \\\hline\end{array}$$

• A)$3,350 surplus -- no additional financing needed
• B) $1,650
• C) $3,650
• D) None of the answers is correct.

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Definitions:

Moral Judgments

Evaluations or decisions about the rightness or wrongness of actions, often guided by societal norms and personal values.

Psychological Reasoning

Psychological reasoning involves the process of using logical, rational thinking and mental activities to understand human behavior and cognitive processes.

Moral Intuitions

Immediate, gut-level feelings that guide judgments of right and wrong without conscious reasoning.

Automatic Unconscious Thinking

Mental processes that occur without conscious awareness or effort, often guiding behaviors and decisions with minimal awareness.