The Harrison Bicycle Company Had the Following Operating Results for 2018-2019

question 85

Multiple Choice

The Harrison Bicycle Company had the following operating results for 2018-2019. In addition, the company paid dividends in both 2018 and 2019 of $80,000 per year and made capital expenditures in both years of $230,000 per year. The company's stock price in 2018 was $14.20 and $12.50 in 2019. Also in 2019, the industry average earnings multiple for the bicycle industry was 8 and the free cash flow and sales multiples were 16 and 1.35, respectively. The company is publicly owned and has 1,400,000 shares of outstanding stock at the end of 2019.
$\text { Balance Sheet, Dec 31, }$
$\begin{array}{lllll} & 2019 & 2018 \\\text { Cash } & \$ 267,000 & \$ 100,000 \\\text { Accounts Receivable } & \$ 525,000 & \$ 400,000 \\\text { Inventory } & \$ 450,000 & \$ 300,000\\\hline\text { Total Current Assets } & \$ 1,242,000 & \$ 800,000 \\\text { Long-lived Assets } & 1,205,000 & 1,100,000\\\hline\text { Total Assets }&\$2,447,000&\$1,900,000\\\hline\text { Current Liabilities }&\$500,000&\$500\\\text { Long-term Debt } & 600,000 & 500,000 \\\text { Shareholder Equity } & 1,347,000 & 1,100,000\\\hline\text { Total Debt and Equity }&\$2,447,000&\$1,900,000\end{array}$

$\text { Income Statement, for year ended Dec 31, }$
$\begin{array}{lcc} & 2019 & 2018 \\\text { Sales } & \$ 6,250,000 & \$ 5,450,000 \\\text { Cost of Sales } & 5,125,000 & 4,400,000\\\hline\text { Gross Margin } & 1,125,000 & 1,050,000 \\\text { Operating Expenses } & 580,000 & 550,000\\\hline\text { Operating Income } & 545,000 & 500,000 \\\text { Taxes } & 218,000 & 200,000\\\hline\text { Net Income }&\$327,000&\$300,000\\\\\text { Cash Flow from Operations } & 2019 & 2018 \\\text { Net Income } & \$ 327,000 & \$ 300,000 \\\text { Plus Depreciation Expense } & 125,000 & 125,000\\\text { + Decrease (-inc) in AccRec. and Inv. }7(275,000) &-\\\text { + Increase (-dec) in Cur. Liabl. }&200,000&-\\\hline\text { Cash Flow from Operations }&\$377,000&\$425,000\end{array}$
\ $\quad$
The accounts receivable turnover ratio for 2019 is (rounded) :

• A)11.2
• B)13.5
• C)13.7
• D)14.9

Explain the influence of information overload on decision-making.

Understand the heuristic approach to reasoning and its implications.

Discuss the role of framing in preference and decision-making.

Compare and contrast different reasoning heuristics and their effects on judgment.

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Definitions:

Marginal Cost

The rise in overall expenses resulting from the production of an additional unit.

Employment Discrimination

Unfair treatment of employees based on race, gender, religion, national origin, physical or mental disability, age, sexual orientation, and other characteristics.

Underemployment

Underemployment refers to a situation where workers are employed in jobs that do not fully utilize their skills or expertise, or when they work fewer hours than they would prefer.

Production Possibilities Curve

A graphical representation in economics showing the maximum number of goods or services that can be produced within an economy given fixed resources and technology, illustrating the trade-offs of economic choice.