PRACTICE QUESTION#11

Given the following Year 12 Financial Statement data for a footwear company:

Income Statement Data

Year 12

(in

000s)

Net Revenues from Footwear Sales

$ 340,000

Operating Profit (Loss)

80,000

Net Profit (Loss)

$ 49,000

Balance Sheet Data

Cash on Hand

3,000

Total Current Assets

$ 70,000

Total Assets

310,000

Overdraft Loan Payable

1,000

1-Year Bank Loan Payable

16,000

Current Portion of Long-term Loans

10,000

Total Current Liabilities

51,000

L-T Bank Loans Outstanding

70,000

Shareholder Equity:

Year 11

Balance

Year 12

Change

Common Stock

10,000

0

10,000

Additional Capital

120,000

0

120,000

Retained Earnings

30,000

29,000

59,000

Total Shareholder Equity

160,000

+29,000

189,000

Based on the above figures, the company's ROE in Year 12 was

42.3%.

14.0%.

28.1%.

25.9%.

None of these.

PRACTICE QUESTION#12

Given the following exchange rate changes:

Year 1

Year 2

Euros (€) per US$

0.8210

0.8185

Sing$ per Brazilian real

0.5660

0.5710

Brazilian real per euro (€)

3.7050

3.7150

US$ per Sing$

0.5910

0.5880

Then it follows that:

The euro has grown stronger versus the US$.

The Brazilian real has grown weaker against the Sing$.

The Brazilian real has grown stronger versus the euro.

The euro has grown weaker against the Brazilian real.

The Sing$ has grown stronger versus the US$ and the Brazilian real.

PRACTICE QUESTION#13

If a company adds new plant capacity at a cost of $45 million, then its annual depreciation costs will rise by

$1,800,000.

$2,250,000.

$180,000.

$225,000.

None of these.

PRACTICE QUESTION#14

If a company spends $5 million on advertising in a given geographic region, sells 600,000 branded pairs online

in the region, and sells 2.4 million branded pairs to footwear retailers in the region, then

20% of the company's advertising expenditures would be allocated to Internet marketing and advertising

costs per online pair sold would be $1.67.

20% of the company's advertising expenditures would be allocated to Internet marketing and advertising

costs per online pair sold would be $1.60.

25% of the company's advertising expenditures would be allocated to Internet marketing and advertising

costs per online pair sold would be $0.60.

advertising costs per pair sold online would be $1.67 and advertising costs per pair sold to retailers would

be $0.80.

None of these.

PRACTICE QUESTION#15

In supplying private-label footwear to chain retailers, the sizes of a company's margins over direct costs should

be viewed as

the net profit a company earns on private-label sales.

the money available to add to the company's retained earnings.

free cash flow, to be used as the company sees fit.

how much private-label sales added to the company's pretax profits, assuming that the company's

margins on branded footwear were sufficient to cover all administrative expenses and all interest costs.

how much the company received from private-label sales over and above materials costs and direct labor

costs—these dollars can be used to help cover the company's income taxes and dividend payments.