Solved

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

question 90

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 current ratio for 2019is:

Understand the graphical representation of regression models and their implications.

Differentiate between models based on their order and the presence of interaction terms.

Identify the role of independent variables in regression models.

Understand the impacts of holding variables constant within regression analysis.

Definitions:

Locomotion

The ability to move from one place to another, which can be observed in all animal groups as a means to interact with their environment.

Birth Control Pills

Oral contraceptives taken by women to prevent pregnancy, containing hormones that inhibit ovulation, alter the uterine lining, and thicken cervical mucus.

FSH

Follicle-stimulating hormone, a gonadotropic hormone synthesized and secreted by the pituitary gland that stimulates the growth of ovarian follicles in females and sperm production in males.

Luteinizing Hormone, a hormone produced by the anterior pituitary gland that plays a key role in regulating the reproductive system.