Bsg quiz 2 full part

Topics: Revenue, Generally Accepted Accounting Principles, Balance sheet Pages: 12 (4120 words) Published: May 6, 2015
1. Assume a company's Income Statement for Year 12 is as follows:

Income Statement Data
Year 12
(in 000s)
Net Revenues from Footwear Sales
$ 280,000
Cost of Pairs Sold
150,000
Warehouse Expenses
15,000
Marketing Expenses
35,000
Administrative Expenses
8,000
Operating Profit (Loss)
72,000
Interest Income (expenses)
(10,000)
Pre-tax Profit (Loss)
62,000
Income Taxes
18,600
Net Profit (Loss)
$ 43,400

Based on the above income statement data (assume interest income is zero), the company's interest coverage ratio is

28.0.

280.0.

4.34.

7.20.

6.20
2.
Which of the following statements about striving to reduce labor costs per pair produced at each of the company's plants is true?

The most cost effective way for a company to achieve low labor costs per pair produced is to keep its total annual compensation per plant worker at levels that are close to the highest (if not the highest) in the industry in each geographic region where it has plants.

As long as labor productivity at a company's plant is in the range of 2,500 to 3,000 pairs produced per worker, then labor costs per pair produced at that plant will be competitive with the labor costs per pair produced at the plants of other companies in the industry.

Companies producing branded footwear with a high S/Q rating are unlikely to achieve labor costs per pair produced that are below the industry average in those geographic regions where they have plants.

Achieving labor costs per pair produced at a particular plant that are the lowest (or close to the lowest) of any plant in the same geographic region requires company managers each year to seek out a combination of base pay increases, piecework incentives per non-defective pair produced, and expenditures for best practices training at the plant that is projected to drive down labor costs even further.

The most effective way for a company to achieve labor costs per pair produced that are below the industry average is to give workers large increases in base pay (above 10%) annually and to keep piecework incentive pay below $0.25 per non-defective pair produced. 3.

If a management team wishes to boost the company's stock price, then it should consider

increasing the company's retained earnings each year, keeping the company's credit rating at A (or above), spending amounts on corporate citizenship and social responsibility that are below the industry average, and issuing sufficient shares of common stock to raise the funds to pay off all long-term debt within 2 years.

boosting the company's dividend by $0.50 or more every year, increasing the company's retained earnings, and paying off all long-term debt as rapidly as possible in order to achieve an A+ credit rating.

paying off all long-term debt as rapidly as possible, keeping the company's dividend payout ratio between 25% and 50%, spending additional money on corporate citizenship and social responsibility, and maintaining a credit rating that is no less than B+.

increasing its effort to boost its market share of branded footwear in all geographic regions, spending additional money on corporate citizenship and social responsibility, and keeping the company's image rating above 75.

pursuing actions to increase earnings per share each year, raising the company's dividend each year (ideally by at least $.05 per share), and repurchasing shares of common stock.

4.
The most attractive way to reduce or eliminate the impact of paying tariffs on pairs imported to a company's distribution warehouse in Europe-Africa is to

build a plant in Europe-Africa and then expand it as may be needed so that the company has sufficient capacity to supply all (or at least most) of the pairs the company intends to try to sell in that geographic region.

lower the S/Q rating on all pairs sold in Europe-Africa to 1 star or 2 stars--no...
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