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1. Andrews Corp. ended the year carrying $17,122,000 worth of inventory. Had they sold their entire inventory at their current prices, how many more dollars of contribution margin would it have brought to Andrews Corp.?
2. Which description best fits Andrews? For clarity:
– A differentiator competes through good designs, high awareness, and easy accessibility.
– A cost leader competes on price by reducing costs and passing the savings to customers.
– A broad player competes in all parts of the market.
– A niche player competes in selected parts of the market.
Which of these four statements best describes your company’s current strategy?
Andrews is a broad cost leader
Andrews is a broad differentiator
Andrews is a niche differentiator
Andrews is a niche cost leader
3. The statement of cash flows for Baldwin Company shows what happens in the Cash account during the year. It can be seen as a summary of the sources and uses of cash (sources of cash are added, uses of cash are subtracted). Please answer which of the following is true if Baldwin issues bonds:
It is a source of cash, and will be shown in the investing section as an addition.
It is a use of cash, and will be shown in the financing section as a subtraction
It is a use of cash, and will be shown in the investing section as a subtraction.
It is a source of cash and will be shown in the financing section as an addition
4. This year Andrews achieved an ROE of 24.9%. Suppose management takes measures that increase Asset turnover (Sales/Total Assets) next year. Assuming Sales, Profits, and financial leverage remain the same, what effect would you expect this action to have on Andrews’s ROE?
Andrews ROE will increase.
Andrews ROE will remain the same.
Andrews ROE will decrease.
5. It is January 2nd and senior management of Baldwin meets to determine their investment plan for the year. They decide to fully fund a plant and equipment purchase by issuing 75,000 shares of stock plus a new bond issue. Assume the stock can be issued at yesterdays stock price ($32.26) and leverage changes to 2.8. Which of the following statements are true? Select all that apply.
Total Assets will rise to $218,095,180
Baldwin will issue stock totaling $2,419,500
The total investment for Baldwin will be $203,188,250
Total liabilities will be $120,458,113
Equity will be $80,310,636
Working capital will remain the same at $12,971,459
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