Globus Quiz 2 - Answers - Part 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

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

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- 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)

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.

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