The Following Is a Summary of Information Presented on the Financial

question 9

Multiple Choice

The following is a summary of information presented on the financial statements of The Cake Company on December 31, 2014.
$\begin{array}{|l|r|c|}\hline \text { Account }&2014&2013\\\hline \text { Current assets } & \$ 65,000 & \$ 50,000 \\\hline \text { Accounts receivable } & 80,000 & 75,000 \\\hline \text { Merchandise inventory } & 50,000 & 40,000 \\\hline \text { Current liabilities } & 75,000 & 50,000 \\\hline \text { Long-term liabilities } & 30,000 & 50,000 \\\hline \text { Common stock } & 50,000 & 40,000 \\\hline \text { Retained earnings } & 40,000 & 25,000\\\hline \\\hline \text { Net sales revenue } & \$ 525,000 & \$ 500,000 \\\hline \text { Cost of goods sold } & 400,000 & 395,000 \\\hline \text { Gross profit } & \$ 125,000 & \$ 105,000 \\\hline \text { Selling and general expenses } & 45,000 & 50,000 \\\hline \text { Net income before income tax expense } & \$ 80,000 & \$ 55,000 \\\hline \text { Income tax expense } & \$ 24,000 & 16,500 \\\hline \text { Net income } & \$ 56,000 & \$ 38,500 \\\hline\end{array}$

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What would a horizontal analysis report with respect to current liabilities?

• A) That current liabilities are 38.46% of total capital
• B) A 50.00% increase in current liabilities
• C) A current ratio of .87
• D) A 33.33% increase in current liabilities

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Definitions:

Conditioning

A process of behavior modification by which a subject comes to associate a desired behavior with a previously unrelated stimulus.

Placebo Effect

The beneficial effect on a person's health experienced after taking a placebo, attributed to the patient's belief in the treatment.

Antiviral Drug

Medication used specifically to treat viral infections by inhibiting the development of the offending virus.

Efficacy

The ability to produce a desired or intended result, often used in the context of medications or treatments.