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(BPL 5100) Business Policy Quiz 2

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Sandra Watson
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BPL 5100 Business Policy Quiz 2 (Part 1 and 2) Question And Answer

Quiz 2 Answers – Part 1

1.
Which of the following is NOT an action company co-managers can take to help
meet or beat
the investor-expected increases in the company’s stock price in upcoming years?
– Making it company practice to issue additional shares of stock each year and use the
proceeds to pay down the debt outstanding until the company’s debt-equity
percentages reach 20% or lower for debt and 80% or more for equity
– Increasing annual dividend payments to shareholders most every year
– Making it a frequent management practice to allocate a portion of internal cash flows
from
operations to repurchasing shares of the company’s common stock
– Putting increased attention on boosting operating profits in all four geographic regions
— the
resulting growth in operating profits companywide will act to increase total net profits
and
EPS; higher earnings per share are an important driver of the company’s stock price
– When the company’s stock price drops because of unexpectedly weak company
performance
in the prior year but is expected to recover and rise in the next several decision rounds.
opting to borrow money preferably in the form of 1-year loans from the Global
Community
Bank (but not so much as to impair the company’s credit rating) and using the borrowed
funds to repurchase outstanding shares of common stock

– Using a portion of the company’s internal cash flows from operations for the next
several
years to repurchase shares of common stock
– Borrowing money from the Global Community Bank (preferably in the form of a 1-year
loan
that can be fully or mostly repaid the following year) and using the proceeds to
repurchase
outstanding shares of common stock: such action makes considerable financial sense
when
the company’s stock price is expected to rise substantially in future years and/or when
unexpectedly weak company performance in the prior year causes a drop in its stock
price
– Increasing annual dividend payments to shareholders (because all net profits not paid
out as
dividends are treated as retained earnings and because bigger retained earnings have
the
effect of increasing shareholders equity)

2.
Which of the following is NOT an action company co-managers can take that has
good potential
for increasing the company’s average ROE and helping the company meet or beat
the investorexpected ROE targets in upcoming years?
– Pursuing efforts to boost total operating profits in all four geographic regions — the
resulting
growth in operating profits companywide will increase total net profits (a company’s net
profits
are the numerator in calculating the company’s ROE)
– Paying a small annual dividend to shareholders (less than $0.50 per share) which is
increased annually by about $0.05 per shares; a small but growing dividend provides
the company with more cash to fund capital expenditures and/or pay down bank
borrowings ahead of schedule

3. Which one of the following is NOT a way to improve the P/Q rating of a
company’s brand of
action-capture cameras?
– Adding one or two more extra performance features
– Increasing the image sensor size and the resolution of the LCD display screen
– Increasing expenditures for camera R&D
– Spending several more dollars on the camera housing and on included accessories
– Increasing the number of models in the company’s lineup of multi-featured cameras

4. If a company pays each camera PAT member a base wage of $21,000, thereby
resulting in base
wages of $84,000 per 4-person PAT, and if camera PATs work an average of 2,000
hours per
year to assemble 3,000 cameras annually, it follows that
– the hourly base wage cost for a PAT to assemble a camera would be $30.00 and that
the
labor cost of assembling a camera at overtime would be $60.00 per PAT.
– the hourly base wage cost for a PAT to assemble a camera would be $28.00 and that
the labor cost of assembling a camera at overtime would be $42.00 per PAT.

– the hourly base wage cost for a PAT to assemble a camera would be $24.00 and that
the
labor cost of assembling a camera at overtime would be $36.00 per PAT.
– the hourly base wage cost for a PAT to assemble a camera would be $10.50 and that
the
labor cost of assembling a camera at overtime would be $15.75 per PAT.
– the hourly base wage cost of assembling a camera would be $28.00 and that the labor
cost
of assembling a camera at overtime cannot be determined from the available
information due
to the lack of information about compensation payments for assembly quality incentives.
perfect attendance bonuses, and the cost of fringe benefit packages

5. Actions that can lead to higher labor productivity in assembling
cameras/drones do NOT include
– increasing the annual bonus for perfect attendance paid to cameraidrone PAT
members from
$800 to $875.
– reducing the number of camera/drone models being assembled.
– boosting the minimum number of cameras/drones that camera/drone PATs are
expected to assemble each week — such failure to achieve the weekly quota in as
many as 4 weeks a year constitutes automatic disqualification for year-end perfect
attendance bonuses.
– increasing total annual compensation per camera/drone PAT member by a minimum
of 2%
and a maximum of 5% annually.
– increasing annual expenditures to train camera/drone PATs in best practice assembly
methods and ways to improve productivity from S2.000 per PAT to $2,250 per PAT

6. The website prices virtually all companies in the industry charge Asia-Pacific
buyers for UAV
drones are likely to be higher than the website prices they charge UAV drone
buyers in North
America
because the administrative costs per drone sold that companies incur on sales to
buyers in
the Asia-Pacific region are over $10 higher than those incurred on sales to buyers in
North
America.

because unfavorable exchange rate adjustments are consistently $10 to $30 higher on
sales
to buyers in the Asia-Pacific region than for buyers in North America.
because the corporate profits taxes that all companies have to pay to governments in
the
Asia-Pacific region are 35% higher on average than the corporate profits companies
have to
pay governments in North America.
when the import duties on shipments of UAV drones to buyers in the Asia-Pacific
region are significantly bigger than the import duties on shipments of UAV drones to
buyers in North America.
because the production/assembly costs per drone that companies incur on UAV drones
shipped to the Asia-Pacific region are many dollars higher than production/assembly
costs
per drone shipped to North America.

7. After each decision round, company managers should make a point of
examining the
information on p. 2 of the Company Operating Report that concerns the
company’s profitability
in the action camera segment in each geographic region because
total operating profits and operating profit margins are very likely to be lower in some
regions than others and because management needs to take actions to boost its
profitability in the underperforming regions in the upcoming decision round.
this report provides the company’s management team with convincing documentation of
the
precise reasons why the company’s camera-related operating profits and operating
profit
margins were bigger in some regions than in others.
this report provides superb guidance about how much the company needs to
raise/lower its
average wholesale camera prices in each geographic region.
this report provides superb documentation about whether the company spent too much
or too
little in each region on advertising, retailer support, and website product displays/info in
the
just-completed decision round.
the information in this report allows managers to see in which regions the company was
most
competitively successful and least competitively successful, competitive factor by
competitive
factor.

8. Which one of the following actions helps boost a company’s image
rating/brand reputation?
Using environmentally friendly camera components and recycled materials for manuals
and
packaging for the company’s action cameras
Charging camera retailers an average wholesale price that is typically 10% or more
below the
highest price being charged in the region
Paying camera/drone PAT members attractively high total annual compensation
packages.
thereby enabling them to enjoy a standard of living well above the Taiwan average
Making it standard practice for the company to offer all buyers of its camera and drones
a full
1-year warranty
Increasing the PIQ rating of the company’s UAV drones

9. Which of the following combinations of actions will likely provide the LEAST
competitive benefits
in helping a company catch the eye of action camera shoppers. significantly
boost overall buyer
appeal for its cameras versus rival brands, and cause more camera shoppers to
purchase its
brand instead of rival brands in each of the four geographic regions?
Increasing expenditures for website product displays/info $100,000 in all four regions
and increasing advertising expenditures by $250,000 in all four regions
Increasing the warranty period from 90 days in each region to 180 days in each region
and
increasing the number of camera models from 4 to 6
Boosting spending for retailer support by $500,000 in all four geographic regions and
instituting $7 reductions in the average wholesale prices charged to camera retailers in
each
geographic region
Boosting its P/Q rating from 5.5 stars to 6.3 stars and increasing spending for
advertising
from levels that are $1,000,000 above the prior-year regional averages to levels about
$3,000,000 above the prior-year regional averages in all four geographic regions.
Boosting the number of weekly sales promotion from 4 to 7 in all four regions and also
increasing the percentage discounts to camera retailers during these promotions from
11% to
15%

10. If a company earns net income of $40 million in Year 8, has 10 million shares
of common stock
outstanding, pays a dividend of $1.00 per share, and has annual interest costs of
$10 million,
then

the company would have Year 8 earnings per share of $3.00 and retained earnings of
$20
million.
the company’s EPS for Year 8 would be $2.00, its dividend payout for Year 8 would
equal
25% of net income, and its cash flow from operations would be $20 million (net income
of $40
million less dividend payments of $10 million less interest costs of $10 million).
the company’s retained earnings for the year would be $30 million: the $30 million in
retained
earnings would be shown on the company’s balance sheet as a reduction in equity
investment by stockholders in Year 9.
the company’s EPS for Year 8 would be $4.00 and its retained earnings for Year 8
would be $30 million (net income of $40 million less dividend payments of $10 million);
the $30 million addition to retained earnings would cause shareholders’ equity
investment to increase by $30 million in Year 8.
the company’s retained earnings for the year would be $20 million (net income of $40
million
less dividend payments of $10 million less interest costs of $10 million) and its earnings
per
share would be $2.00.

11. Which one of the following is NEITHER an advantage or disadvantage of
shifting to roboticsassisted camera assembly methods?
The capital cost of converting to robot-assisted camera assembly can increase a
company’s
interest costs, to the extent that a portion of the capital costs are financed by bank
loans.
Robot-assisted camera assembly boosts the annual productivity of camera PATs by
500 cameras per year.
Installing robots at each camera workstation enables the size of PATs to be cut from 4
members to 3 members.
Robot-assisted assembly reduces total annual compensation costs per PAT and also
reduces
the overtime cost of assembling a camera.
Robot-assisted camera assembly increases annual workstation maintenance costs

12. The industry-low, industry-average, and industry-high cost benchmarks on
pp. 6-7 of each issue
of the Camera & Drone Journal
have the greatest value to the managers of companies whose camera costs per unit
and
drone costs per unit are above the industry averages.
are of little value to company managers in making decisions to improve company

performance in the upcoming decision round. except in those cases when a company is
losing money in one or more geographic regions.
are particularly valuable to company managers who are actively considering
undertaking
robotics upgrades in their camera and drone assembly facilities in the upcoming
decision
round.
are of considerable value to the managers of companies selling low-cost/low-price
action
cameras and/or UAV drones but are of very limited value to the managers of all other
companies.
are worth careful scrutiny by the managers of all companies because they help
managers determine if corrective actions are needed in the event their company’s
camera/drone costs for the benchmarked cost categories do NOT appear to be
competitive (or “in line”) with those of rival companies.

13. If a company adds 60 new workstations at a cost of $75,000 each and also
spends $20 million
for addition space in its camera/drone assembly facilities to accommodate more
workstations,
then its annual depreciation costs will rise by
$24,500,000
$1,750,000.
$3,500.000.
$980,000.
• $1,225,000.

14. Which of the following is NOT an action that can help boost a company’s
credit rating? In
answering this question, you may wish to consult the Help section for page 5 of
the Camera &
Drone Journal and read the discussion pertaining to “The Credit Rating
Measures.”
• Repurchase shares of the company’s common stock to enhance the company’s
debtto-equity percentages
Put increased attention on boosting operating profits and operating profit margins in all
four
geographic regions — the resulting growth in operating profits companywide will
increase the
company’s interest coverage ratio
Issue additional shares of stock and use the proceeds to pay down 5-year and 10-year
loans
Pay off any 1-year loans (and temporarily avoid the use of 1-year loans) because 1-year
loans are considered a current liability and thus reduce the company’s current ratio
Temporarily reduce dividend payments to shareholders and use the cash saved from
lower
dividend payments to pay down 5-year and 10-year loans

15. The benefits of pursuing a strategy of social responsibility and corporate
citizenship include
the positive impact that such a strategy has on the company’s PiQ ratings for both
action
cameras and UAV drones
the boost such a strategy gives to increasing the company’s global sales volume and
global
market share for both action cameras and UAV drones.
the enhanced profitability that results when a company opts to spend money on socially
responsible activities.
• the positive impact that such a strategy can have on the company’s image rating if the
company spends a meaningful amount on socially responsible activities over a
multiyear period.
the boost such a strategy gives to the company’s stock price.

16. Which one of the following represent the MOST important/helpful results from
the latest decision
round that company managers need to review/study in order to guide their
strategic moves and
decisions to improve their company’s competitiveness and overall company
performance in the
upcoming decision round?
Each company’s performance on EPS, ROE, stock price, credit rating and image rating
displayed on pages 2 and 3 of the Camera & Drone Journal.
The comparative competitive efforts of rival companies in each geographic region
are found in Competitive Intelligence Report.
The Industry Scoreboard data on p.1 of the Camera & Drone Journal.
The Industry Overview information on p. 4 of the Camera & Drone Journal.
The company’s Income Statement on p. 4 of the Company Operating Report.

17. Which one of the following actions helps increase a company’s EPS?
Minimizing the company’s dividend payments so as to boost retained earnings–higher
retained earnings divided by the number of shares outstanding result in higher EPS
Issuing enough additional shares of stock to raise sufficient cash to pay off all of the
company’s outstanding loans: cutting interest costs to zero can always be counted on to
boost the company’s EPS
Striving to be the dominant seller of action cameras and UAV drones in all four
geographic
regions every year by having the highest P/Q ratings and out-marketing rivals: the
added
profits on large volume sales will drive increases of 10% or more in EPS
Cutting the company’s selling prices for both action cameras and UAV drones in all four
regions to levels at least 5% below those being charged by any company: the resulting
increases in sales volumes and revenues will boost the company’s EPS

Allocating a portion of the company’s net income each year to repurchasing shares of
the company’s common stock

18. A company’s managers should give serious consideration to changing from a
low-cost/low price
strategy for action cameras to a different strategy in the 4 regional markets for
action cameras
when
• all or most of the regional markets are so crowded with companies that are using
mostly copycat competitive approaches to selling low-priced cameras to pricesensitive,
bargain-hunting buyers that it is difficult for any of these companies to
capture sales volumes and revenues big enough to earn profits large enough to meet
investor-expected EPS, ROE, and stock price appreciation targets.
a big fraction of the companies in the industry are marketing 5 or more models of action
cameras with a P/Q rating of 6-stars or higher and selling them at average wholesale
prices
that are more than $30 above the regional averages.
the company’s operating profits per action camera sold are not substantially above the
industry-average benchmarks in at least three geographic regions (as reported on p. 6
of the
most recent Camera & Drone Journal).
the company’s market share for action cameras has not been the largest in all four
geographic regions for two straight years and when its EPS and ROE have also not
been the
highest in the industry for two straight years.
most of the company’s low-cost/low-price rivals are offering buyers a 180-day warranty
and
are spending above-average amounts on advertising in all four geographic regions.

19. If your company earns an ROE of 20% at a time when the investor-expected
ROE target is 25%
and if the instructor-determined weight for achieving the ROE target is worth 20
points, then
your company’s ROE score on the Investor Expectations scoring standard will be
17 points
15 points (75% of the 20 points awarded for meeting the ROE target)
18 points
16 points (80% of the 20 points awarded for meeting the ROE target)
20 points (1 point for each 1% the company earned on total shareholders’ equity)

20. Which one of the following is NOT an attractive way to reduce the design,
assembly, marketing,
and other costs per action-capture camera sold in an effort to achieve a sizable
low-cost

competitive advantage over rivals?
Striving to keeping marketing costs per camera sold in all 4 geographic regions sold to
levels
that are below the industry-average benchmark and. better still close to the industry-low
benchmark (as reported on p. 6 of the Camera& Drone Journal)
Spending aggressively (but also taking care not to overspend) on camera product R&D
Doing whatever it takes to entirely avoid any use of overtime in assembling cameras
because paying PAT members 1.5 times the hourly base wage to assemble cameras at
overtime is much too expensive.
Paying PAT members an attractive assembly quality incentive to help reduce warranty
claims
on cameras sold and also boost PAT productivity
Trying different combinations of components, product enhancements. and extra
performance
features to be used in action cameras in order to discover the lowest cost combination
for
achieving a competitively appealing P/Q rating

 

Quiz 2 – Answers – Part 2

1.
Which one of the following is NOT a way to improve the P/Q rating of a company’s
brand of UAV
drones?
Decreasing the number of models in the company’s line-up from 2 to 1
Improving the battery pack to permit more minutes of flying time on a single charge
Offering all buyers of the company’s UAV drones a full day of flight training at a nearby
independently-operated drone flight training center for a modest extra $50 charge
Increasing the number of rotors
Improving the caliber and functionality of the camera stabilization device (so that video
quality
is not so adversely affected by strong wind conditions)

2. Which one of the following is unlikely to be an attractive and effective way to
reduce the design,
assembly. marketing, and other costs of UAV drones and help achieve a sizable
competitive
advantage over rival companies based on lower overall costs per UAV drone
sold?
Trying out numerous different combinations of design components, performance
enhancements, and extra performance features to be used in the company’s UAV
drones in
order to discover the lowest cost combination for achieving a competitively appealing P/Q
rating
Spending only modest amounts annually for Corporate Social Responsibility and
Citizenship
initiatives
Switching to robot-assisted assembly methods to lower labor costs per drone
assembled
Designing, assembling, and selling UAV drones having a P/Q rating of 0.5 stars
Trying to keep the warranty period to 60 days or 90 days (but no more than 120 days), if
it is
competitively feasible to do so

3. Which one of the following actions is MOST likely to REDUCE the productivity
of camera/drone
PATs?
Failing to have a total annual compensation package for camera/drone PAT members
that is
at least equal to the prior-year industry-average compensation level
Boosting the annual base wage of camera/drone PAT members by only 2% in any given
year
Not raising the annual bonus for perfect attendance for a period of 3 years
Cutting the number of camera models being assembled from 4 models to 3 models and
the
number of drone models being assembled from 3 models to 2 models
Decreasing the size of the assembly quality incentive for cameras to a maximum of
$0.40 and the assembly quality incentive for drones to a maximum of $1.00

4. 11Which of the following is an action that merits serious consideration in trying
to improve a
company’s credit rating? In answering this question, you may wish to consult the
Help section
for page 5 of the Camera & Drone Journal and read the discussion pertaining to
The Credit
Rating Measures.”
Avoid all use of overtime in assembling cameras and drones
Do not increase the compensation paid to PAT members (until the desired credit rating
is
achieved)–this will help keep production costs for both cameras and drones from rising
Issue additional shares of common stock and use the proceeds to pay off bank loans,
thereby immediately improving the company’s debt-equity percentages
Cut the prices the company charges for both cameras and drones in all four geographic
regions by at least 10% in order to improve the company’s EPS, ROE, and stock price
Increase the size of the company’s dividend payments to stockholders–this helps
reduce the
amount of retained earnings on the company’s balance sheet (which in turn helps
increase
the company’s interest coverage ratio)

5. As a general rule, it is important for company managers to be aware of the
regions where the
company’s UAV drone business was most profitable and least profitable in the
just-completed
decision round (so they can pursue corrective actions in the underperforming
regions in the
upcoming decision round); the best information, then the best place(s) to look for
this
information is
page 1 of the Company Operating Report showing “Assembly and Facilities
Operations.”
the top section of page 5 of the Camera & Drone Journal.
the benchmarking data for operating profits and operating profit margins on p. 7 of the
Camera & Drone Journal and the region-by-region breakdowns of drone net sales
revenues, costs, total operating profits, and operating profit margins displayed on
page 3 of the Company Operating Report. on page 3 of the Company Operating Report
there are
page 4 of the Company Operating Report showing the company’s financial statements
and
selected financial statistics.
in the 4-page section of the Competitive Intelligence Report that shows the comparative
competitive efforts of rival companies for each region.

6. A company’s managers should almost always give serious consideration to
making significant
adjustments in its camera/drone strategies and competitive approaches when
the company has been unsuccessful in achieving the investor-expected targets for
EPS, ROE, and stock price appreciation in the prior decision round and certainly if it
has been unsuccessful for the past two decision rounds.
the number of camera and drone workstations the company has installed is NOT well
above
the industry-averages (as reported on pages 6 and 7 of the most recent Camera &
Drone
Journal).
several rival companies are charging prices below the regional averages in all four
regions for
cameras and drones with a four-star or lower P/Q rating.
the company’s total production/assembly costs for both action cameras and UAV drones
are
above the industry averages (as reported on pages 6 and 7 of the latest issue of the
Camera
& Drone Journal).
its sales and market shares for cameras and drones are below the industry averages in
as
many as two geographic regions.

7. The makers of action-capture cameras have good reason to sell their camera
models to camera
retailers in Europe-Africa at lower average wholesale prices than the average
wholesale prices
charged to camera retailers in Latin America because
the costs of shipping AC cameras from Taiwan to camera retailers in Europe-Africa are
$2
lower per camera than the costs of shipping AC cameras from Taiwan to retailers in
Latin
America.
annual interest rates on bank loans in the Europe-Africa region are 1%-2% lower than
interest rates on bank loans in Latin America.
the administrative costs per camera sold that camera-makers incur on sales to camera
retailers in Europe-Africa are about S4 lower than those incurred on sales to camera
retailers
in Latin America.
the warranty repair costs for cameras all companies have to pay in the Europe-Africa
region
are $10 lower than in Latin America.
they incur lower import duties per action camera sold/shipped to camera retailers in
Europe-Africa than the import duties they have to pay on each action camera sold/
shipped to camera retailers in Latin America.

8. Which of the following actions does NOT help improve a company’s image
rating/brand
reputation?
Successfully increasing its global market share of worldwide action-capture camera
sales
Building a widely recognized reputation for paying camera/drone PAT members the
biggest total annual compensation package of any company in the industry
Increasing the company’s P/Q ratings of both action cameras and UAV drones
Successfully increasing its global market share of worldwide UAV drone sales
Spending sizable sums of money for multiple social responsibility initiatives and good
corporate citizenship over a multi-year period

9. If a company adds 40 new workstations at a cost of $75,000 each and also
spends $14 million
for addition space in its camera/drone assembly facilities to accommodate more
workstations,
then its annual depreciation costs will rise by
10% of the capital cost or $1.700,000.
5% of the capital cost or $850,000.
4% of the capital cost or $680,000.
S560,000.
S17 million.

10. Which of the following actions are most likely to catch the eye of action
camera shoppers,
generate the biggest boost in overall buyer appeal for a company’s camera
models versus rival
brands. and cause the biggest number of additional camera shoppers to
purchase its brand
instead of rival brands?
Boosting merchandising support to camera retailers stocking the company’s brand by
15%
Reducing average wholesale prices to camera retailers by $5 in all four geographic
regions
Increasing the annual number of weekly sales promotion campaigns from 2 to 3 and
also
increasing the discount to camera retailers during these weekly promotions by 1%
Boosting the number of camera models from 3 to 4 while also keeping the company P/Q
rating at the same star rating
Raising the P/Q rating on the company’s camera models from 4.2 stars to 4.9 stars and
only increasing the average wholesale prices to retailers by $4 in all four regions

11. Which of the following results from the latest decision round are LEAST
important in providing
guidance to company managers in making their strategic moves and decisions to
improve their
company’s competitiveness and rank among the top-performing companies in the
upcoming
decision round?
The information concerning the company’s market segment performance for both action
cameras and UAV drones found on pages 2 and 3 of the Company Operating Report
The comparative competitive efforts of rival companies in each geographic region that
are
found in Competitive Intelligence Report
Each company’s performance on EPS, ROE. stock price. credit rating. and image rating
displayed on the pp. 2 and 3 of the Camera & Drone Journal
The industry-low, industry-average, and industry-high benchmarks on pp. 6-7 of each
issue of
the Camera & Drone Journal
The balance sheet data in the middle section of page 5 of the Camera & Drone Journal

12. If your company earns $3.00 per share of common stock (in a year when the
investor-expected
EPS target is $3.60), if another company has an industry-leading EPS of S5.00,
and if EPS has
a scoring weight of 20 points, then your company’s EPS score on the Best-inIndustry scoring
standard will be
11 points
17 points (83.3% of the 20 points awarded for meeting the EPS target)
10 points
12 points
15 points

13. The industry-low. industry-average. and industry-high benchmarks on pp. 6-7
of each issue of
the Camera & Drone Journal
are of little value to company managers in making decisions to improve company
performance in the upcoming decision round because the benchmarking data do not
identify
which particular companies have the lowest/highest costs and operating profits in each
geographic region.
are most valuable to the managers of companies whose costs are close to the industrylow
values and to the managers of companies whose operating profits and operating profit
margins are at or close to the industry-high benchmarks.
are worth careful scrutiny by the managers of all companies because when the
camera/drone benchmarking data signals that a company’s costs/operating profits for
one or more of the benchmarks are clearly out-of-line (or unappealing), managers are
well advised to take corrective action in the upcoming decision round.
have the greatest value to the managers of companies that have negative operating
profit per
camera sold in one of more geographic regions because their marketing andlor
administrative expenses per camera sold are too far above the industry averages.
are of considerable value to the managers of companies pursuing a low-cost strategy
but are
of very limited value to managers of companies pursuing all other types of strategies to
outcompete and outperform rival companies.

14. Which of the following is an action company co-managers can take that will
help the company
meet or beat the investor-expected ROE targets in upcoming years?
Making it standard practice to issue more shares of common stock to fund all capital
expenditures for camera/drone workstation space, the installation of additional
camera/drone
workstations, and any robotics upgrades that company co-managers decide to
undertake
Not paying an annual dividend to shareholders or else paying only a small portion of net
profits (say less than 15%) to shareholders in the form of an annual dividend because
retaining more earnings in the business makes it easier to meet the higher ROE targets
expected by investors
Frequently increasing annual dividend payments to shareholders, perhaps reaching a
dividend payout ratio of 30% to 50% (or more) in years 11-15: retaining a smaller
fraction of earnings for use in the company’s camera/drone business makes it easier
for the company to achieve the higher ROE targets expected by investors.
Making it standard practice to use a combination of internal cash flows from operations
and
new issues of common stock to finance the company’s growth and new capital
investments in
assembling action cameras and UAV drones.
Financing the installation of additional camera/drone workstations, and any robotics
upgrades
that company co-managers decide to undertake with a combination of 50% debt (1-
year, 5-
year, and/or 10-year bank loans) and 50% proceeds from the issue of additional shares of
common stock

15. Which one of the following is NEITHER an advantage or disadvantage of
shifting to roboticsassisted camera assembly methods?
Installing robots at each camera workstation enables the size of PATs to be cut
by one
member.
The capital cost of converting to robot-assisted camera assembly results in higher
annual
depreciation costs in producing/assembling cameras.
Robotics-assisted assembly increases workstation maintenance costs from $10,000
annually per camera workstation to $25,000 annually per camera workstation.
Robot-assisted camera assembly reduces total annual compensation costs per camera
PAT.
If borrowing is used to partly or wholly finance the cash outlays required to pay for
robotics
upgrades, the company will incur higher interest costs until the borrowed funds are
repaid.

16. As explained in the Help section for the Workforce Compensation, Training,
and Product
Assembly decision screen, if (1) a company pays a drone PAT member an annual
base wage of
$25.000, an $800 year-end bonus for perfect attendance, and provides a companypaid annual
fringe benefits package worth $3,600 and (2) a PAT is paid a $4 assembly quality
incentive per
UAV drone assembled that is equally divided among 4 PAT members, then if a
drone PAT’s
productivity is 1500 drones per year
the total compensation cost per drone assembled would be $82.40.
the total compensation cost per drone assembled would be $41.20.
the total compensation cost per drone assembled would be $37.33.
the total compensation cost per drone assembled would be $78.67.
the total compensation cost per drone assembled would be $42.00

17. One of the benefits of pursuing a strategy of social responsibility and
corporate citizenship that
involves spending sizable sums of money for social responsibility initiatives and
good corporate
citizenship over a multi-year period is
greater ease in achieving the investor-expected performance targets for EPS, ROE, and
stock price, provided a company wins one or more Gold Star Awards for Corporate
Citizenship.
a higher image rating.
increased power and effectiveness of a company’s advertising expenditures for action
cameras in all four regions in those years when the company’s total annual spending for
socially responsible activities exceeds the industry average (as reported on p. 3 of the
Camera & Drone Journal.
increased company ability to charge higher prices for its action cameras and UAV
drones
(because of widespread public enthusiasm for the company’s social responsibility
initiatives).
increased global sales volume and global market share of action cameras. provided as
much
as 20% of company’s advertising expenditures in each geographic region are devoted
to
media ads informing the general public about all of the socially responsible activities
being
undertaken.

18. If a company earns net income of S55 million in Year 8, has 10 million shares
of common stock
outstanding, pays a dividend of $1.50 per share, and has annual interest costs of
$15 million,
then
the company’s credit rating would be at least a B+ because dividend payments are
equal to
annual interest costs.
the company’s EPS for Year 8 would be $2 50 (net income of $55 million less dividend
payments of $15 million less S15 million in interest payments = $25 million divided by 10
million shares).
the company’s credit rating would be no less than an A because net income is more
than
three times higher than annual interest costs.
the company’s EPS for Year 8 would be $4.00 (net income of $55 million less dividend
payments of $15 million = $40 million divided by 10 million shares).
the company’s EPS for Year 8 would be $5.50 and Its retained earnings for Year 8
would be $40 million (net income of $55 million less dividend payments of $15 million).

19. If company co-managers wish 😮 pursue efforts aimed specifically at helping
the company meet
or beat the investor-expected stock price appreciation targets in upcoming years,
then comanagers should consider
issuing new shares of common stock to help fund needed capital investment
expenditures in
those decision rounds when internal cash flows are insufficient to cover all the
expenditures
on capital investment projects management has decided to undertake.
actions to boost the company’s net income and EPS, increase annual dividend
payments to shareholders, and regularly allocate a portion of internal cash flows to
repurchasing shares of the company’s common stock.
outspending rivals on corporate social responsibility initiatives and charitable
contributions, so
as to convince civic-minded investors to purchase shares of the company’s stock and
thus
help drive up the stock price.
boosting the amount of earnings retained in the business, thereby increasing the hoard of
cash held in the company’s retained earnings account on its Balance Sheet.
issuing additional shares of common stock and using the proceeds to pay off all bank
loans
and then further issuing shares of stock as may be needed to help finance capital
expenditures for additional workstation space, new workstations, and possibly robotics
upgrades so as to completely avoid the use of debt-financing.

20. A company’s EPS can most always be bolstered by managerial actions to
offer more camera/drone models to buyers than rivals: 7 models is ideal.
spend at least $1 million to $3 million more on various kinds of marketing efforts than
any other company in all four regions: the resulting annual increases in camera/drone sales
volumes, revenues, and profits will normally boost the company’s EPS.
offer 1-year warranties on the company’s cameras/drones.
achieve an A+ credit rating–the resulting lower interest rates on borrowings help drive
increases in EPS
allocate significant cash flows from operations to repurchasing shares of common
stock, ideally most every year.

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(BPL 5100) Business Policy Quiz 2

 

(BPL 5100) Business Policy Quiz 2

 

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