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Q1. Given the following Year 12 balance sheet data for a footwear…
Q1. Given the following Year 12 balance sheet data for a footwear company:
Balance Sheet Data
Cash on Hand $ 10,000
Total Current Assets 150,000
Total Fixed Assets 250,000
Total Assets $400,000
Accounts Payable $ 20,000
Overdraft Loan Payable 0
1-Year Bank Loan Payable 5,000
Current Portion of Long-Term Bank Loans 17,000
Total Current Liabilities 42,000
Long-Term Bank Loans Outstanding 138,000
Total Liabilities 180,000
Shareholder Equity: Year 11
Balance Year 12
Change
Common Stock 20,000 0 20,000
Additional Capital 120,000 0 120,000
Retained Earnings 60,000 20,000 80,000
Total Shareholder Equity 190,000 +20,000 220,000
Total Liabilities and Shareholder Equity $400,000
Based on the above figures and the definition of the debt-assets ratio presented in the Help section for p. 5 of the Footwear Industry Report, the company’s debt-assets ratio (rounded to 2 decimal places) is
0.42.
0.40.
0.45.
0.47.
0.44.
Q2. If a company spends $28.8 million to install refurbished footwear-making equipment with capacity to produce 2 million pairs of athletic footwear at its Asia Pacific production facility, then its annual depreciation costs at that facility will rise by
2.5% or $720,000.
4% or $1,152,000.
5% or $1,440,000.
10% or $2,880,000.
8% or $2,304,000.
Q3. Which one of the following actions is guaranteed to result in lower labor costs per pair produced at one of your company’s production facilities?
Reducing the S/Q rating of branded pairs produced for 4.6 stars to 4.1 stars
Increasing the base wage paid to production workers by at least 3% annually
Increasing total employee compensation by 4% and realizing a 6% increase in production worker productivity
Increasing spending for TQM/Six Sigma quality control from $3 per pair to $5 per pair
Increasing total expenditures for best practices training by 10% annually
Q4. Which one of the following helps increase the S/Q rating of branded pairs produced at a particular production location?
Increasing expenditures for enhanced styling/features
Increasing the incentive pay for production workers, and thereby reduce reject rates on pairs produced
Increasing efforts to improve the productivity of production workers
Maximizing the use of overtime at each production location
Avoiding bidding for contracts to supply private-label footwear to chain retailers, which damages the company’s image as a producer of top quality footwear
Q5. The branded operating benchmarking data on p. 7 of each issue of the Footwear Industry Report showing the industry-low, industry-average, and industry-high values for operating profit per branded pair sold in each geographic region
1. are of considerable value to the managers of companies looking for strong evidence that their company needs to cut branded footwear prices in the internet and wholesale segments and/or spend more money on marketing efforts so as to increase branded sales and market share in one or more geographic regions.
2. have little-decision-making value because the benchmarking data do not identify which companies have the lowest/highest operating profit margins per branded pair sold.
3. always merit close attention because when these benchmarks reveal that a company’s operating profits are negative or unattractively small in one or more geographic regions, managers are well-advised to pursue immediate corrective actions in the upcoming decision round.
4. are most valuable to the managers of companies whose ROE was well below the reported ROE industry-average benchmark in one or more regions.
5. have the greatest value to the managers of companies whose market share outcomes were below the reported industry-average benchmark for market share in one or more geographic regions.
