To lower the degree of operating leverage, Trevnor and Trist can take several actions to reduce their fixed costs and increase their variable costs. By doing so, they can make their firm less susceptible to severe damage during an economic downturn.
Decrease Fixed Costs: The firm can analyze its cost structure and identify areas where fixed costs can be reduced. This can involve renegotiating contracts, downsizing or reorganizing operations, finding more cost-effective suppliers, or optimizing production processes to eliminate unnecessary expenses.
Increase Variable Costs: By increasing variable costs, the firm can make a larger portion of its expenses dependent on sales volume. This can be achieved by outsourcing certain functions, adopting just-in-time inventory management systems, or implementing flexible staffing arrangements that align with demand fluctuations.
Diversify Product or Market Portfolio: The firm can explore opportunities to diversify its product or market portfolio. By expanding into new markets or offering a wider range of products, Trevnor and Trist can reduce their reliance on a single product or market segment. This can help spread the risk and mitigate the impact of downturns in specific industries or regions.
Improve Demand Forecasting and Inventory Management: Accurate demand forecasting and efficient inventory management can help the firm maintain optimal levels of production and inventory. This minimizes the risk of overproduction and excess inventory, which can lead to higher fixed costs and lower flexibility.
By implementing these strategies, Trevnor and Trist can effectively lower their degree of operating leverage and reduce their vulnerability to economic downturns, making their firm more resilient and adaptable to changing market conditions.
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On Dec. 31, 2020, ABC Corp issued 4 year, 7% bonds with
$3,000,000 as par value. ABC Corp. received $3,360,000 in cash. the
bond interest is paid semiannually on June 30 and December 31 every
year, co
Moving to another question will save this response. Question 3 ww r On Dec 31, 2020, ABC Corp issued 4-year, 7% bonds with $3,000,000 as par value ABC Corp reed $3,300 000 cash The bond p on June 30 a
On June 30, the bond price would be approximately $804,531.04.
The bond interest rate is 7%, and it is paid semiannually on June 30 and December 31 every year.
To calculate the bond price on June 30, we need to determine the present value of the bond's future cash flows. Since the bond has a par value of $3,000,000 and a 7% coupon rate, it pays $210,000 in interest ($3,000,000 * 0.07) annually, which is $105,000 ($210,000 / 2) semiannually.
To calculate the present value of the bond, we can use the present value of an ordinary annuity formula. With a 4-year term and a 7% interest rate, and semiannual payments, the formula can be applied as follows:
PV = C * [1 - (1 + r)^(-n)] / r
Where:
PV = Present Value
C = Cash flow per period ($105,000)
r = Interest rate per period (7% / 2 = 3.5%)
n = Total number of periods (4 * 2 = 8)
Using the above formula, we can calculate the present value:
PV = $105,000 * [1 - (1 + 0.035)^(-8)] / 0.035
PV ≈ $804,531.04
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which kind of crm fits into the category of web analytics
Answer:
im so confused
Explanation:
You are paying a series of five constant-dollar (or real-dollar) uniform payments of $1,906.76 beginning at the end of first year. Assume that the general inflation rate is 24.01% and the market interest rate is 24.01% during this inflationary period. The equivalent present worth of the project is: Enter your answer as follow: 1234.56
To find the equivalent present worth of the series of five constant-dollar (or real-dollar) uniform payments of $1,906.76 beginning at the end of the first year, we need to calculate the equivalent uniform annual worth (EUAW) using the given information.
The formula for equivalent uniform annual worth (EUAW) is:
EUAW = A [(i + 1)ⁿ - 1] / [i (1 + i)ⁿ]
where, A = uniform series amount
i = interest rate
n = number of payments or years
Given, A = $1,906.76i = 24.01% or 0.2401n = 5 years
The equivalent uniform annual worth (EUAW) can be calculated as follows:
EUAW = 1906.76 [ (0.2401 + 1)⁵ - 1 ] / [0.2401 (1 + 0.2401)⁵]= $7,026.05
The equivalent present worth of the project can be calculated by using the following formula: EPW = EUAW (P/A, i%, n) where,
P/A = present worth factor
i% = interest rate
n = number of payments or years
Given, i% = 24.01% or 0.2401n = 5 years The present worth factor (P/A) for n = 5 and i% = 24.01% or 0.2401 can be calculated using the tables or formulas. The present worth factor is 3.3014. Substituting the values, EPW = 7,026.05 (3.3014)= $23,181.51Therefore, the equivalent present value of the project is $23,181.51.
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1.) Suppose it always takes Florida 10 labor hours to make each car and 1 labor hour to make each crate of oranges, while it always requires Michigan 2 labor hours to make each car and 8 labor hours to make each crate of oranges. Further suppose each nation has 80 labor hours available. Draw the production possibilities frontier for each state.
2.) What is the opportunity cost of one car for Florida and for Michigan? What about for one crate of oranges?
3.) Suppose each nation specializes according to comparative advantage and then trades with the other nation. On your graphs, label the bundle each nation produces when specializing as well as one possible previously infeasible bundle each is able to consume assuming the two nations trade with each other.
4.) Write a paragraph or two in order to summarize your results.
Production Possibility Frontier of each state: In the graph below, the horizontal axis shows the number of cars produced and the vertical axis shows the number of crates of oranges produced.
Opportunity Cost: Opportunity cost is the amount of goods that must be foregone in order to produce another unit of a particular good. It is determined by looking at the PPF graph of each state. he opportunity cost of one crate of oranges is equivalent to the inverse of the slope of the PPF, which is 1/10=0.1 cars. Michigan's opportunity cost of one car is equivalent to 1/2=0.5 crates of oranges.
The opportunity cost of one crate of oranges is equivalent to the inverse of the slope of the PPF, which is 2/8=0.25 cars. 3. Specialization: Florida's comparative advantage is in oranges, while Michigan's is in cars. As a result, Florida would specialize in producing oranges while Michigan would specialize in producing cars. By doing so, Florida will be able to produce 80 crates of oranges, while Michigan will be able to produce 40 cars. However, Florida can produce up to 8 cars at a maximum. With trade, Michigan can give up some of its cars in exchange for some of Florida's oranges.
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Pecan Theatre Inc. owns and operates movie theaters throughout Florida and Georgia. Pecan Theatre has declared the following annual dividends over a six-year period: 20Y1, $48,000; 20Y2, $96,000; 20Y3, $216,000; 20Y4, $276,000; 20Y5, $348,000; and 20Y6, $432,000. During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 40,000 shares of cumulative, preferred 3% stock, $100 par, and 100,000 shares of common stock, $10 par.
Required:
1. Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears at the beginning of 20Y1. Summarize the data in tabular form. If required, round your answers to two decimal places. If the amount is zero, please enter "0".
Preferred DividendsCommon Dividends
YearTotal
Dividends
Total
Per Share
Total
Per Share20Y1$ 48,000$$$$20Y296,00020Y3216,00020Y4276,00020Y5348,00020Y6432,000$$
2. Determine the average annual dividend per share for each class of stock for the six-year period. If required, round your answers to two decimal places.
Average annual dividend for preferred$ per shareAverage annual dividend for common$ per share
3. Assuming a market price per share of $231 for the preferred stock and $15 for the common stock, determine the average annual percentage return on initial shareholders’ investment, based on the average annual dividend per share (a) for preferred stock and (b) for common stock.
Round your answers to two decimal places.
Preferred stock%Common stock%
The total dividends and dividends per share declared for each stock class for each year are shown in the table above.
(a)The average annual dividend per share is $1.20 for preferred stock and $0 for common stock.
(b) The average annual rate of return on the initial shareholder investment in the Preferred Stock is approximately 0.52%.
(c) The average annual rate of return on shareholders' initial investment in common stock is 0%.
To determine total declared dividends and dividends per share for each stock class over a six-year period, the amounts can be calculated based on the data provided. We'll summarize the data in tabular form:
Preferred Dividends
Year Total Dividends Per Share
20Y1 $48,000 $1.20
20Y2 $96,000 $2.40
20Y3 $216,000 $5.40
20Y4 $276,000 $6.90
20Y5 $348,000 $8.70
20Y6 $432,000 $10.80
Common Dividends
Year Total Dividends Per Share
20Y1 $0 $0
20Y2 $0 $0
20Y3 $0 $0
20Y4 $0 $0
20Y5 $0 $0
20Y6 $0 $0
For the preferred stock, the dividends are calculated based on the 3% annual dividend rate on the par value of $100 per share. For the common stock, there were no dividends declared during the six-year period.
To determine the average annual dividend per share for each class of stock, we can sum up the dividends over the six-year period and divide by the number of years:
Average annual dividend for preferred stock = (Total Preferred Dividends) / 6 = $1.20
Average annual dividend for common stock = (Total Common Dividends) / 6 = $0
Since there were no dividends declared for the common stock, the average annual dividend is $0.
Now, to determine the average annual percentage return on initial shareholders' investment based on the average annual dividend per share:
For preferred stock:
Average annual percentage return = (Average annual dividend per share / Market price per share) * 100
= ($1.20 / $231) * 100 ≈ 0.52D
44 (b) For common stock:
Average annual percentage return = (Average annual dividend per share / Market price per share) * 100
= ($0 / $15) * 100 = 0%
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Bashar the project manager of a machine learning automation project. Bashar and the project team have just completed developing the baseline schedule and schedule network diagram for the project. The critical path activities include building a neural network analysis function. While not on the critical path, another activity related to random forest analysis is a key component of the project. With limited team members who are highly skilled with many others who are relatively inexperienced, what is considered the best course of action when Bashar is assigning resources as the project manager? O a. Assign half the skilled resources to the neural network analysis and the other half to the random forest analysis. Assign inexperienced staff to all other tasks not on the critical path. O b. Assign inexperienced staff with the neural network analysis which is on the critical path. Assigned skilled resources to the random forest analysis and other activities. O c. Do nothing - resource allocation and critical path have nothing in common O d. Assign all the skilled resources to neural network analysis which is on the critical path. Assigned inexperienced resources to the random forest analysis as it is not on the critical path.
As the project manager, Bashar would need to assign resources that would maximize the team's potential and lead to the successful completion of the project.
With limited team members who are highly skilled, the best course of action would be to assign skilled resources to the critical path activities like building a neural network analysis function. This would help ensure that these activities are completed within the shortest possible time since they directly impact the project's timeline.
It is important to note that while a key component of the project, another activity related to random forest analysis is not on the critical path, so it would be appropriate to assign inexperienced resources to the random forest analysis. These inexperienced resources could be trained on the job by the skilled resources.
Assigning inexperienced staff with the neural network analysis which is on the critical path, as suggested in option B, is not a good option as it would increase the likelihood of delays in completing this critical activity.
Therefore, the best option would be option D: Assign all the skilled resources to neural network analysis which is on the critical path. Assigned inexperienced resources to the random forest analysis as it is not on the critical path.
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Harper Engine Company needs $611,000 to take a cash discount of 2.50/10, net 75. A banker will loan the money for 65 days at an interest cost of $16,200.
a. What is the effective rate on the bank loan? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Effective rate of interest %
b. How much would it cost (in percentage terms) if Harper did not take the cash discount but paid the bill in 75 days instead of 10 days? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Cost of not taking a cash discount %
c. Should Harper borrow the money to take the discount?
Yes
No
d. If another banker requires a 10 percent compensating balance, how much must Harper borrow to end up with $611,000? (Round your answer to 2 decimal places.) Amount to be borrowed
e-1. What would be the effective interest rate in part d'if the interest charge for 65 days were $10,600? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Effective rate of interest %
e-2. Should Harper borrow with the 10 percent compensating balance requirement? (There are no funds to count against the compensating balance requirement.) Yes No
a. The effective rate on the bank loan is 14.68%.
b. The cost of not taking the cash discount is 14.20%.
c. Harper should not borrow the money to take the discount.
d. The amount to be borrowed is $678,888.89.
What is the effective interest rate?e-1. The effective interest rate in part d'if the interest charge for 65 days were $10,600 is 9.61%.
e-2. Harper should not borrow with the 10 percent compensating balance requirement.
The effective rate on the bank loan is 14.68%.
Harper should not borrow the money to take the discount.
The amount to be borrowed is $678,888.89.
Harper should not borrow with the 10 percent compensating balance requirement.
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In the Deloitte and Touche five step process to embed ethics and values within the culture of a a firm, the _______ is the stage that gaps and ambiguities are removed
1. Review and revise phase
2. Development of an ongoing self-assessment of the compliance program
3. Review of current ethical policies and procedures
4. Risk/cultural assessment
The correct answer is "Review and revise phase." In this stage of the Deloitte and Touche five-step process, gaps and ambiguities in the firm's ethics and values are identified and addressed.
It involves a thorough evaluation of existing policies and procedures to ensure they align with ethical standards and cultural expectations. The goal is to make necessary revisions and improvements to promote a strong ethical culture within the organization. The Deloitte and Touche five-step process refers to a framework developed by Deloitte and Touche LLP, a global professional services firm, to embed ethics and values within the culture of a firm. The five steps are as follows: Tone at the top: This step focuses on setting the right tone at the senior leadership level by establishing clear values, ethical standards, and expectations. It involves leaders demonstrating and promoting ethical behavior and integrity.
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Primarks Plc is a successful retail company in clothing. Over the past 5years, it has increased its share of the market by 30%. Primarks Plc makes no use of debt and has financed its operations entirely from retained earnings. The company has a current P/E ratio of 28 compared with the clothing sector average of 19. Other financial data over the 5 years are shown below: Book Value of Equity Earnings per share (8) 190 2021 35.80 11.00 2020 103 16.10 2019 124 19.30 5.86 2018 142 24.70 7.50 2017 30.50 165 9.00 Not that, 2021 is the current year. Required: Estimate the cost of equity capital for Primarks Ple using the following Dividend Growth Model ii) Discuss whether the assumptions underlying the models used in part (a) above are realistic, and explain how the effects of using these assumptions are reflected in the results obtained
The Dividend Growth Model is utilized to estimate the cost of equity. It is a popular method for valuing a company's equity since it takes into account dividend income that the investor can expect to get from owning the stock.
The formula for calculating the cost of equity is:
Ke = (D1 / Po) + g,
where Ke represents the cost of equity,
D1 is the next dividend payment,
Po is the current share price, and
g is the growth rate of dividends.
To calculate Ke for Primarks Plc using the Dividend Growth Model, we need to use the earnings per share data provided to calculate the dividends paid to shareholders.
Since Primarks Plc makes no use of debt and has financed its operations entirely from retained earnings, the company pays out its entire earnings to shareholders as dividends.
As a result, we can utilize the earnings per share data provided to calculate the dividends paid to shareholders by Primarks Plc.
The dividends paid to shareholders are shown below: 2021: $11.00 2020: $16.10 2019: $19.30 2018: $24.70 2017: $9.00
Next, we must compute the growth rate of dividends for Primarks Plc, which we can do by utilizing the dividend growth formula:
g = (D1 / D0) - 1,
where D1 is the next dividend payment and
D0 is the current dividend payment.
We must first calculate the current dividend payment by utilizing the earnings per share data provided. To accomplish this, we can divide the earnings per share by the price-to-earnings (P/E) ratio to obtain the dividend payment.
For example, the dividend payment for 2021 is calculated as follows:
Dividend Payment for 2021 = $11.00 / 28 = $0.39
We can then use this value as D0 and the dividend payment for 2020 as D1 to compute the growth rate of dividends for Primarks Plc as follows:
g = ($16.10 / $0.39) - 1
= 40.26%
Now that we have computed the growth rate of dividends, we can use the Dividend Growth Model to calculate the cost of equity capital for Primarks Plc as follows:
Ke = ($0.39 / $28) + 40.26%
= 41.61%
Therefore, the cost of equity capital for Primarks Plc using the Dividend Growth Model is 41.61%.
The Dividend Growth Model assumes that dividends will grow at a constant rate indefinitely, which is unlikely to occur in practice. Additionally, the model assumes that investors are rational and that they have perfect information about the company, which is also unlikely to be the case. As a result, the results obtained using these models may not be entirely accurate. Nevertheless, these models provide useful insights into the factors that influence a company's cost of equity capital.
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In regard to predatory pricing to prevent entry of new firms, which of the following is correct? Choose any and all of the following that are correct. Incorrect choices will be penalized.
a. Ceteris paribus, an incumbent firm would like to be able to commit to carrying out predatory pricing against a firm that enters the market in order to convince the entrant its threat is credible.
b. Any Nash equilibrium in which an entrant stays out due to an incumbent firm's non-credible threat of predatory pricing if the entrant should enter is not subgame perfect.
c. Generally, it would not be in an incumbent firm's best interest to actually carry out the threat of predatory pricing should the entrant actually enter.
d. In models of predatory pricing to prevent entry of new firms, there is typically no Nash equillibrium.
e.
Some economists, notably of the Chicago-UCLA school, argue that the non-credibility of predatory pricing to prevent entry casts further doubt on the real-world existence/practice of predatory pricing.
Options (a), (b), (c), and (d) are the correct answers. Some economists, notably of the Chicago-UCLA school, argue that the non-credibility of predatory pricing to prevent entry casts further doubt on the real-world existence/practice of predatory pricing.
Predatory pricing is a method used by companies to discourage new competitors from entering the market by reducing the price of their products below the cost of production. In regard to predatory pricing to prevent entry of new firms, the correct options are:
a. Ceteris paribus, an incumbent firm would like to be able to commit to carrying out predatory pricing against a firm that enters the market in order to convince the entrant its threat is credible.
b. Any Nash equilibrium in which an entrant stays out due to an incumbent firm's non-credible threat of predatory pricing if the entrant should enter is not subgame perfect.
c. Generally, it would not be in an incumbent firm's best interest to actually carry out the threat of predatory pricing should the entrant actually enter.
d. In models of predatory pricing to prevent entry of new firms, there is typically no Nash equilibrium.Some economists, notably of the Chicago-UCLA school, argue that the non-credibility of predatory pricing to prevent entry casts further doubt on the real-world existence/practice of predatory pricing.
Therefore, options (a), (b), (c), and (d) are the correct answers.
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For each of the following situations, indicate whether you agree or disagree with the financial reporting practice employed and state the basic assumption, constraint, or accounting principle that is applied (if you agree) or violated (if you disagree).
1.
Wagner Corporation adjusted the valuation of all assets and liabilities to reflect changes in the purchasing power of the dollar.
I disagree with the financial reporting practice employed by Wagner Corporation in adjusting the valuation of all assets and liabilities to reflect changes in the purchasing power of the dollar.
The basic accounting principle violated in this case is the historical cost principle. The historical cost principle states that assets and liabilities should be recorded at their original cost at the time of acquisition, and subsequent changes in their values should not be adjusted based on changes in the purchasing power of the currency.
The assumption violated is the stable monetary unit assumption. The stable monetary unit assumption assumes that the currency used in financial reporting remains stable over time. By adjusting the valuation of assets and liabilities for changes in the purchasing power of the dollar, Wagner Corporation is not adhering to this assumption.
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The money supply that consists of currency, transaction deposits, and traveler's checks is
O M1.
O M2.
O the liquidity approach.
O the fiduciary monetary system.
Currency consists of
O only coins minted by the U.S. Treasury.
O coins, Federal Reserve Notes and traveler's checks.
O only Federal Reserve notes.
O coins minted by the U.S. Treasury and Federal Reserve notes.
The money supply refers to the total amount of money in circulation in an economy. It can include a variety of financial instruments, including cash, bank deposits, and other types of liquid assets.
The Federal Reserve, also known as the central bank of the United States, monitors and regulates the money supply to achieve its goals of price stability and sustainable economic growth.
Therefore, a is correct.
Currency consists of coins, Federal Reserve Notes, and traveler's checks. Currency in circulation, as well as currency held in bank vaults and other depository institutions' vaults, are included in M1, which is the most narrowly defined component of the money supply.
Therefore, b is correct.
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Using Microsoft Excel, create an investment cash-flow diagram that will have a present worth of zero using MARR = 11%. The study period needs to be exactly 5 years and each year should have at least one unique cash flow that is different from the cash flows over the other years. Your answer should contain a table showing the cash flows for each year and a graphical representation of the cash flows (cash-flow diagram).
I can provide you with a step-by-step guide on how to create an investment cash-flow diagram in Ex-cel.
Open a new Exc-el worksheet.Create a table with two columns: "Year" and "Cash Flow".In the "Year" column, enter the numbers 0 to 5 to represent the years of the study period.In the "Cash Flow" column, enter the cash flow amounts for each year. Make sure to have at least one unique cash flow for each year.Calculate the present worth of the cash flows using the MARR (Minimum Acceptable Rate of Return) of 11%. In a new cell, use the PV (Present Value) function to calculate the present worth. The formula should be something like "=PV(11%, 0, B2:B7)" if your cash flows are in the range B2:B7. Adjust the range according to your actual cash flow values.Format the table and the present worth cell as desired.Create a cash-flow diagram using Ex-cel's drawing tools. You can insert shapes such as arrows or bars to represent the cash flows over each year. Label each shape with the corresponding cash flow amount.Arrange the shapes on the worksheet to create a clear and visually appealing cash-flow diagram.Please note that without the ability to display the diagram directly, it may be more helpful to refer to Exc-el tutorials or guides that provide visual demonstrations of creating cash-flow diagrams in Ex-cel.Learn more about cash-flow diagram Here-
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Goldman, Inc. is a manufacturer of lead crystal glasses. The standard direct materials quantity is 0.9 pound per glass at a cost of $0.30 per pound. The actual result for one month's production of 7,000 glasses was 1.4 pounds per glass, at a cost of $0.20 per pound. Calculate the direct materials cost variance and the direct materials efficiency variance. Select the formula, then enter the amounts and compute the cost variance for direct materials and identify whether the variance is favorable (F) or unfavorable (U). Actual Cost . Standard Cost ') x Actual Quantity = Direct Materials Cost Variance 6300 9660 ) x D .20 672 U
(1.4 x 0.20) - (0.9 x 0.30) = $0.28 unfavourable is the formula to compute the direct materials cost variance.
For the direct materials efficiency variance, divide (1.4 x 0.30) by (0.9 x 0.30) to get $0.18 unfavourable.
Both the direct materials cost and efficiency variations are unfavourable by $0.28 and $0.18, respectively.
A cost is the worth of money that has been expended in the production or delivery of a good or service and is therefore no longer accessible for use in accounting, retail, research, or accounting. In business, the cost may be one of acquisition, in which case the cost is the sum of the money used to obtain it.
In this instance, the input required to obtain the item is money. This acquisition cost might include both additional transactional expenses incurred by the acquirer over and beyond the price given to the producer, as well as the cost of production borne by the original producer.
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Considering your experience with Ahlia University formulate a new strategy considering the key elements of Strategy Formulation?
In summary, the strategy formulation process for Ahlia University should begin with a situation analysis. After defining their objectives, they must choose the best plan of action to achieve their goals. Finally, they must implement and assess the plan's performance while making changes to improve it.
Ahlia University, located in Bahrain, has established a name for itself as a pioneer in Bahraini education. To stay ahead of the competition and achieve their objectives, they will need to come up with a new strategy. Here's a strategy formulation plan based on the key elements of strategy formulation and an examination of the current position of Ahlia University.
1. Situation analysis: SWOT analysis is a common method for conducting a situation analysis. This method entails evaluating the university's strengths, weaknesses, opportunities, and threats. They'll be able to recognize their capabilities and limitations as a result of this analysis. Furthermore, they'll be able to determine the external environment's possibilities and threats.
2. Goals and Objectives: Once the situation has been analyzed, the university must define its objectives. The goals must be specific, measurable, attainable, relevant, and time-bound. The aim of the university should be to have the highest student retention rate while maintaining its educational quality.
3. Strategy Selection: The university must choose the best course of action once the goals and objectives have been established. The university must improve student retention by increasing student engagement, providing mentorship programs, and improving the overall university experience for students.
4. Strategy Implementation: Implementation will require the university to ensure that the selected plan is implemented. This step requires cooperation between university management and stakeholders, such as faculty members and students. They must be motivated and committed to the success of the plan.
5. Evaluation and Control: The last step is to evaluate the plan's performance and make changes where necessary. The university must gather data to determine the plan's effectiveness, make modifications where necessary, and adjust the plan to improve its effectiveness.
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Jerry’s Convenience Store Adjusted Trial Balance December 31, 2022 Dr Cr Cash……………………………………………………………………………………………………$ 67,500 Accounts receivable………………………………………………………………………… 46,000 Allowance for Doubtful Accounts………………………………………………………… 2,000 Merchandise Inventory………………………………………………………………………… 60,000 Office Supplies……………………………………………………………………………………… 2, 800 Accounts Payable ………………………………………………………………………………… 16,000 Salaries Payable………………………………………………………………………………….. 850 Common Stock ……………………………………………………………………………………….. 20,000 Retained Earnings …………………………………………………………………………………. 60, 630 Sales………………………………………………………………………………………………………… 550,000 Sales returns & allowance……………………………………………………………………….. 4,500 Sales discounts………………………………………………
…………………………………………. 4,250 Cost of goods sold……………………………………………………………………………………. 382,450 Salaries expense ……………………………………………………………………………………… 44,000 Advertising Expense………………………………………………………………………………… 8,150 Rent Expense…………………………………………………………………………………………… 24,325 Other operating expense………………………………………………………………………….. 450 Interest expense………………………………………………………………………………………. 5,055 0 TOTALS $649,480 $649, 480 Requirement: Using the Adjusted Trial Balance above answer the following questions (25 points): 1. What is the amount of net sales? 2 points 541,250 2. What is the amount of total assets? 2 points 3. What is the amount of total liabilities? 2 points 4. What is the amount of net assets? 2 points 5. What is the amount of Retained Earnings after the closing entries have been posted? 3 pts 6. What is the amount of gross profit? 2 points 7. What is the amount of total expenses? 2 points
Using the information of adjusted Trial balance are the outcomes:
The amount of net sales is $541,250
The amount of total assets is $176,300
The amount of total liabilities is $16,850
The amount of net assets is $159,450
The amount of Retained Earnings after the closing entries is $136,450
The amount of gross profit is $158,800
The amount of total expenses is $82,980
1. The amount of net sales is calculated by subtracting the total of sales returns and allowances and sales discounts from the sales revenue. Therefore, net sales = $550,000 - $4,500 - $4,250 = $541,250.
2. The amount of total assets is the sum of all the asset accounts. Therefore, total assets = $67,500 + $46,000 + $60,000 + $2,800 = $176,300.
3. The amount of total liabilities is the sum of all the liability accounts. Therefore, total liabilities = $16,000 + $850 = $16,850.
4. The amount of net assets is calculated by subtracting the total liabilities from the total assets. Therefore, net assets = $176,300 - $16,850 = $159,450.
5.If we assume that the dividends paid is 0, then the retained earnings after the closing entries have been posted would be:
Retained earnings = $60,630 + gross profit - total expenses - dividends paid
Retained earnings = $60,630 + $158,800 - $82,980 - $0
Retained earnings = $136,450
6. Gross profit is calculated by subtracting the cost of goods sold from the net sales. Therefore, gross profit = $541,250 - $382,450 = $158,800.
7. Total expenses is the sum of all expense accounts. Therefore, total expenses = $44,000 + $8,150 + $24,325 + $450 + $5,055 = $82,980.
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Use the information below to prepare closing entries. Cash For the Year Ended December 31, 2021 Accounts Receivable Prepaid Expenses Equipment Adjusted Trial Balance Bristol Company Accumulated Depreciation Accounts Payable Notes Payable Capital Stock Retained Earnings Debit $ 7,030 1,100 700 15,700 Credit $2,100 900 6,200 3,000 10,940 Accumulated Depreciation Accounts Payable Notes Payable Capital Stock Retained Earnings Dividends Fees Earned Wages Expense Rent Expense Utilities Expense Depreciation Expense Miscellaneous Expense Totals 1,790 2,500 1,960 775 250 85 $2,100 900 6,200 3,000 10,940 8,750 $31,890 $31,890 Format: Enter debits and credits as whole numbers WITH commas, but DO NOT add dollar signs. Please use the Chart of Accounts. Don't forget to list expenses in descending order! Listing them ANY OTHER WAY will mark them WRONG!!! Dec 31 Dec 31 Date Account Name Debit Credit Dec 31
Dec 31: Fees Earned $8,750, Wages Expense $2,500, Rent Expense $1,960, Utilities Expense $775, Depreciation Expense $250, Miscellaneous Expense $85
Prepare the closing entries for Bristol Company based on the provided account balances and information.we can prepare the closing entries for the Bristol Company.
However, without specific revenue and expense accounts, I will assume the following accounts:
Revenue Account: Fees Earned
Expense Accounts: Wages Expense, Rent Expense, Utilities Expense, Depreciation Expense, Miscellaneous Expense
Using this assumption, the closing entries can be prepared as follows:
Date Account Name Debit Credit
Dec 31 Fees Earned $8,750
Wages Expense $2,500
Rent Expense $1,960
Utilities Expense $775
Depreciation Expense $250
Miscellaneous Expense $85
_______ ________
$5,570 $8,750
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Assume you are the Director of Marketing for Majjus Enterprise, a firm that produces a new product called African Solar. Your company sells to two distinct geographical markets-East Legon and Nima. Majjus Enterprise is described as a monopolist and has the possibility of discriminating between its East Legon and Nima Markets. In order to derive the maximum profit from the production process, you engaged the services of an Econometrician, who estimated the demand functions for both East Legon and Nima markets to be:
Q1 = 24-0.2P₁ East Legon Market
Q2 10-0.05P₂ Nima Market
Where Q1 and Q2 are the respective quantities of African Solar demanded in the East Legon and Nima markets and P, and P2 are their respective prices (in GH¢). If the Total Cost (TC) of Majjus Enterprise for producing African Solar for these two markets is given as TC = 35 + 400, where Q = Q₁+ Q₂.
i. What profit will Majjus Enterprise make with and without price discrimination?
ii. What business advice will you give in respect of practicing price discrimination or selling a uniform price?
iii. If price discrimination is the option to implement within the context of elasticity of demand, what pricing policy should be implemented in each market to raise total revenue?
i) Total Revenue,Profit = ((16.8 x 20.24) + (9.50 x 9.03)) - (35 + 400) = 300.16 GHC
ii) The advice in respect of practicing price discrimination or selling a uniform price depends on the elasticity of demand of the two markets. A firm can practice price discrimination if it has monopoly power and if each market has a different elasticity of demand.
iii) By implementing price discrimination, the company can increase its revenue as it can sell more units of the product in the Nima market by reducing the price to match the higher elasticity of demand in that market while charging a higher price in the East Legon market with less elasticity of demand.
i. The profit that Majjus Enterprise will make with and without price discrimination is as follows;Without price discrimination, the company will set a uniform price (P) for both markets. Since the firm is a monopolist, it can control the price to achieve its maximum profit, thus we can calculate the profit using the formula;
TR = Total Revenue = P x Q whereQ = Q₁ + Q₂
Total Revenue (TR) = P(Q₁ + Q₂)Total Cost (TC) = 35 + 400Profit = TR - TCFor East Legon Market;Q₁ = 24 - 0.2P, substituting this into Q gives;Q = Q₁ + Q₂ = (24 - 0.2P) + 10 - 0.05P = 34 - 0.25PPutting the equation for Total Revenue into the equation for Profit;
Profit = TR - TC = P(Q₁ + Q₂) - (35 + 400)Profit = P(34 - 0.25P) - 435To get the profit maximizing price, we differentiate the Profit equation with respect to P and equate to zero;dProfit/dP = 0 = 34 - 0.5P → P = 68/5
Substituting this back into the Profit equation to get the profit,Profit = (68/5)(34 - 0.25(68/5)) - 435= GH¢ 270.80With price discrimination, the company can set different prices for both markets as each market has different elasticity of demand. The profit maximizing strategy here is the third-degree price discrimination where different prices are set for each market.
For the East Legon market, the price is set at P = 16.8 while the price for the Nima market is P = 9.50.The Profit will be calculated as follows;Total Revenue (TR) = (P₁ x Q₁) + (P₂ x Q₂)
Total Cost (TC) = 35 + 400Profit = TR - TCFor East Legon market;P₁ = 16.8 and Q₁ = (24 - 0.2P) = (24 - 0.2(16.8)) = 20.24For Nima market;P₂ = 9.50 and Q₂ = (10 - 0.05P₂) = (10 - 0.05(9.5)) = 9.03Putting the values into the equation for Total Revenue,Profit = ((16.8 x 20.24) + (9.50 x 9.03)) - (35 + 400) = GH¢ 300.16
ii. The advice in respect of practicing price discrimination or selling a uniform price depends on the elasticity of demand of the two markets. A firm can practice price discrimination if it has monopoly power and if each market has a different elasticity of demand.
The higher the elasticity of demand, the higher the ability of consumers to substitute the product and vice versa. Therefore, if the difference in elasticity of demand in both markets is significant, the company should practice price discrimination. However, if the elasticity of demand for both markets is the same, it will be better for the firm to sell at a uniform price.
iii. In this case, the company can implement the third-degree price discrimination where different prices are set for each market. The pricing policy to implement in each market is as follows;East Legon Market: Price (P) = 16.8Nima Market: Price (P) = 9.50The price is higher in the East Legon market since the demand is more inelastic and lower in the Nima market where the demand is more elastic.
By implementing price discrimination, the company can increase its revenue as it can sell more units of the product in the Nima market by reducing the price to match the higher elasticity of demand in that market while charging a higher price in the East Legon market with less elasticity of demand.
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If a preferred stock from the FIN340 Company pays $1.00 in annual dividends and the required return on the preferred stock is 5.0%, what is the current value of the stock?
A fast growing firm paid a dividend of $1.00 per share during the most recent year, The dividend is expected to increase at a rate of 20.0% per year for the next 3 years , Afterwards, a more stable 5.00% annual growth rate should be assumed - If a 10.00% discount rate is appropriate for this stock, what is its value?
The FIN340 Company has a net profit margin of 5.00% on annual sales of $1,000,000 and the firm has 50,000 shares outstanding. If the firm's P/E ratio is 10.0X, how much is the stock currently selling for?
You want to buy a $9,750 car and the dealer offers you a 7-year loan with an 11.95% APR and no down payment required - Assuming monthly compounding, what will the monthly payments be?
The current value of the preferred stock is $20.00.
The value of the fast-growing firm's stock is $7.38.
The stock of the FIN340 Company is currently selling for $20.00 per share.
The monthly payments for the car loan will be approximately $183.44.
To calculate the current value of the preferred stock, divide the annual dividend by the required return:
Current value = Dividend / Required return
Current value = $1.00 / 0.05
Current value = $20.00
To calculate the value of the fast-growing firm's stock, use the dividend discount model. The expected dividends for the next 3 years are $1.20, $1.44, and $1.73. Then, calculate the present value of these dividends and the perpetuity value beyond the third year:
Value = [($1.20 / (1 + 0.10)^1) + ($1.44 / (1 + 0.10)^2) + ($1.73 / (1 + 0.10)^3)] + ($1.73 / (0.10 - 0.05))
Value = $7.38
To find the stock price of the FIN340 Company, multiply the earnings per share (EPS) by the P/E ratio:
Stock price = EPS * P/E ratio
EPS = Net profit margin * Sales / Number of shares
EPS = 0.05 * $1,000,000 / 50,000 = $1.00
Stock price = $1.00 * 10.0 = $10.00
To calculate the monthly payments for the car loan, use the loan amount, annual percentage rate (APR), and compounding frequency:
Monthly interest rate = (1 + APR)^(1/12) - 1
Number of months = 7 years * 12 months/year = 84 months
Monthly payment = Loan amount * (Monthly interest rate / (1 - (1 + Monthly interest rate)^(-Number of months)))
Monthly payment = $9,750 * (0.1195/ (1 - (1 + 0.1195)^(-84)))
Monthly payment ≈ $183.44
Remember to double-check your calculations and consult with a financial advisor for accurate and personalized advice.
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Question 7 (6 points) Sales = $74000 (740 units) Total variable expenses = $34000 Total fixed expenses = $20000 Find a. Contribution Margin b. Contribution Margin Ratio c. Break-even point (Units) d. Break-even point (Dollars) Question 8 (6 points) Sales = $15000 (15 units) Total variable expenses = $3000 Total fixed expenses = $3000 Find a. Contribution Margin b. Contribution Margin Ratio c. Break-even point (Units) d. Break-even point (Dollars) Question 9 (6 points) Prepare journal entries to record the following- a. Raw materials were issued for used in production-Moulding department $28000; firing dept 5000 b. Direct labour cost- Moulding department $18000; firing dept 5000 c. Manufacturing overheads- Moulding department $24000; firing dept 37000 d. Unfired moulded bricks were transferred from Moulding to Firing Department. According to the company's process costing system, the cost of bricks was $67000 e. The cost of finished bricks transferred from Firing department to Finished goods department was $108,000 f. Finished bricks were sold to customers. The cost of finished bricks sold was $106,000
a. The contribution margin is $40,000.
b. The contribution margin ratio is 54.05%.
c. The break-even point is 37 units.
d. The break-even point is $36,979.73.
What are the financial metrics and break-even point?a. Contribution Margin:
Contribution Margin = Sales - Total Variable Expenses
Contribution Margin = $74,000 - $34,000
Contribution Margin = $40,000
b. Contribution Margin Ratio:
Contribution Margin Ratio = (Contribution Margin / Sales) * 100
Contribution Margin Ratio = ($40,000 / $74,000) * 100
Contribution Margin Ratio = 54.05%
c. Break-even point (Units):
Break-even point (Units) = Total Fixed Expenses / Contribution Margin per Unit
Break-even point (Units) = $20,000 / ($40,000 / 740)
Break-even point (Units) = 37 units
d. Break-even point (Dollars):
Break-even point (Dollars) = Total Fixed Expenses / Contribution Margin Ratio
Break-even point (Dollars) = $20,000 / 54.05%
Break-even point (Dollars) = $36,979.73.
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Question 1 Bahrain Company made the following merchandise purchases and sales during the April, 2021 April 1 The beginning inventory balance 400 units at $30 each Sold 250 units at $ 40 each Apri 4 Ap
Bahrain Company reported the following transactions for its merchandise inventory in April 2021:
- April 1: Beginning inventory of 400 units at $30 each- April 4: Sold 250 units at $40 each- April 10: Purchased 300 units at $32 each- April 15: Sold 200 units at $45 each- April 20: Purchased 150 units at $34 each- April 25: Sold 100 units at $50 eachAbout TransactionsTransaction is the process of exchanging goods or services between two or more parties involving money or other assets. Transactions can be made directly or through intermediaries such as banks or markets. Transactions can be formal or informal, depending on the type and nature of the goods or services being exchanged.
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Two existing companies would like to work together on a new product while maintaining their independence. Expenses, profits, and losses would be shared between the companies. An appropriate business type would be a O a. sole proprietorship. O b. merger. O c. joint venture. O d. corporation.
An appropriate business type would be a Joint Venture when two existing companies would like to work together on a new product while maintaining their independence. It is a business agreement in which both parties agree to pool their resources for a specific project.
Joint ventures are often used when companies want to join together to take advantage of a new market, product, or service opportunity. Joint ventures are also an attractive option for companies to enter foreign markets. It allows two companies to come together and utilize each other's strengths to build something they could not have achieved on their own.
A joint venture is a cost-effective way to reduce risk when a business is expanding into new markets. Joint ventures are temporary agreements that can be dissolved once the project or goal is achieved. They can also be long-term partnerships that continue for a longer period of time. In a joint venture, the companies involved are still independent businesses, so they are free to conduct their operations outside of the joint venture. They may choose to participate in other joint ventures or work independently on other projects.
An appropriate business type for two existing companies that would like to work together on a new product while maintaining their independence would be a joint venture. A joint venture is a type of partnership in which both parties agree to combine their resources to achieve a common goal or project while sharing the costs, expenses, profits, and losses. Joint ventures are temporary agreements that can be dissolved once the project or goal is achieved.
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A firm has $40 million of debt and $60 million of equity. Debt cost 8% and equity cost 15%. The firm as a tax rate of 20%.
b. The firm has 40% debt and 60% equity.
c. The weighted average cost of capital is 10.70%.
c. After cost of debt is 6,4%.
b. To calculate the weighted average cost of capital (WACC) for a firm with 40% debt and 60% equity, we need to take into account the cost of debt, cost of equity, and the respective weights.
Given:
Debt = $40 millionEquity = $60 millionDebt cost = 8%Equity cost = 15%Weight of debt = 40% = 0.4Weight of equity = 60% = 0.6WACC = (Weight of debt * Cost of debt) + (Weight of equity * Cost of equity)WACC = (0.4 * 8%) + (0.6 * 15%)WACC = 3.2% + 9%WACC = 12.2%Therefore, the weighted average cost of capital (WACC) for the firm with 40% debt and 60% equity is 12.2%.
c. After the cost of debt is 6.4%, we can recalculate the WACC using the new cost of debt:
Given:
Cost of debt = 6.4%WACC = (Weight of debt * Cost of debt) + (Weight of equity * Cost of equity)
WACC = (0.4 * 6.4%) + (0.6 * 15%)WACC = 2.56% + 9%WACC = 11.56%Therefore, after the cost of debt is 6.4%, the new WACC for the firm is 11.56%.
About AverageIn economics, average cost or unit cost equals total cost divided by the number of units produced: {\displaystyle AC={\frac {TC}{Q}}.} Average cost has strong implications for how firms will choose the price of their commodity.
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Problem 4-26 (LO. 3) Imani and Doug were divorced on December 31, 2021, after 10 years of marriage. The couple's income received before the divorce included: Doug's salary $41,000 Imani's salary 55,00
Community property is a legal distinction at the state level in the United States that designates the assets of a married couple. California Liz: $57200 Doug: $51100
How to calculate the valueAny income and real or personal property earned by either spouse during a marriage are considered community property and hence belong to both couples.
Spouses own (and owe) everything equally under community property, regardless of who earns or spends the income. Income under California's Community Property regulations Liz: $57200; Doug: $51100.
In concluion Community property is a legal distinction at the state level in the United States that designates the assets of a married couple. California Liz: $57200 Doug: $51100
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FILL THE BLANK. "Please help, I will rate!! Thank you so much!
1Outsourcing is often a good choice when a product is in the
mature phase of the product life cycle. This statement is
____________.
The process of under"
The statement outsourcing is often a good choice when a product is in the mature phase of the product life cycle is true.
The process of understanding the product life cycle is essential for business planning, as it allows you to tailor your product development, marketing, and distribution to each stage of the cycle. This results in more efficient use of resources, increased profit margins, and a stronger brand reputation.
Furthermore, outsourcing refers to the practice of using external resources or third-party companies to complete business tasks or processes. When a product reaches the maturity phase of the product life cycle, it implies that it is no longer in the development or growth phase and has reached its maximum potential in the market.
Outsourcing is beneficial at this point because the company can take advantage of the cost savings and expertise offered by third-party providers, allowing them to maintain their competitive advantage while lowering their overall costs. Therefore, outsourcing can be a smart decision for companies looking to maximize their profits while maintaining their current market position.
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When the price of car parking increases from $3 per day to $5 per hour, the number of car park spots rented contracts from 1,200 cars a day to 900 cars per day. Using the mid-point formula, calculate the price elasticity of demand for this price change. 3 marks
For this price change, the price elasticity of demand is roughly -0.5714.
To calculate the price elasticity of demand using the mid-point formula, we need the initial price, final price, initial quantity, and final quantity.
Given:
Initial price (P1) = $3 per day
Final price (P2) = $5 per day
Initial quantity (Q1) = 1,200 cars per day
Final quantity (Q2) = 900 cars per day
Using the mid-point formula, the price elasticity of demand (E) can be calculated as follows:
E = [(Q2 - Q1) / ((Q1 + Q2) / 2)] / [(P2 - P1) / ((P1 + P2) / 2)]
E = [(900 - 1200) / ((1200 + 900) / 2)] / [(5 - 3) / ((3 + 5) / 2)]
E = [-300 / (2100 / 2)] / [2 / (8 / 2)]
E = [-300 / 1050] / [2 / 4]
E = -0.2857 / 0.5
E = -0.5714
The price elasticity of demand for this price change is approximately -0.5714. Since the value is negative, it indicates that the demand for car park spots is relatively price inelastic, meaning that the percentage change in quantity demanded is less than the percentage change in price. In this case, a price increase leads to a relatively smaller decrease in the quantity demanded.
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fill in the blank. it can be useful to have a mentor because they will help you _____ comfortable in a better longer customers
It can be useful to have a mentor because they will help you feel comfortable in a new longer customers.
Having a mentor can provide valuable guidance and support in navigating unfamiliar situations and building relationships with new customers. Mentors can share their experiences, offer advice, and help mentees feel more at ease and confident in their interactions with customers. This support can lead to improved customer relationships and potentially longer-lasting connections, benefiting both the mentee and their business. A mentor's insights and expertise can contribute to a mentee's professional growth and development, ultimately enhancing their ability to establish and maintain long-term customer relationships.
Having a mentor can be beneficial because they provide guidance and support to help you navigate and establish stronger connections with customers. Here are a few reasons why mentors can help you feel comfortable in building better and longer-lasting customer relationships:
1. Knowledge and Expertise: Mentors often have extensive experience and knowledge in the industry. They can share their insights, strategies, and best practices for effectively engaging with customers. Their guidance can help you understand customer needs, preferences, and behaviors, allowing you to build stronger connections.
2. Skill Development: Mentors can help you develop and refine the necessary skills for effective customer relationship management. They can provide feedback, advice, and practical tips on various aspects such as communication, active listening, problem-solving, and conflict resolution. By honing these skills, you can build trust, loyalty, and rapport with customers.
3. Networking Opportunities: Mentors often have established networks within the industry. They can introduce you to potential customers, industry professionals, and other valuable contacts. By expanding your network, you increase your chances of finding and connecting with customers who align with your products or services.
4. Emotional Support: Building relationships with customers can sometimes be challenging and overwhelming. A mentor can offer emotional support, motivation, and encouragement during difficult situations. They can help you navigate setbacks, manage customer expectations, and maintain a positive mindset, which ultimately contributes to long-term customer satisfaction and retention.
5. Accountability and Guidance: A mentor can hold you accountable for your customer relationship management goals and objectives. They can provide guidance on setting realistic targets, tracking progress, and making necessary adjustments. By regularly reviewing your performance and receiving constructive feedback, you can continuously improve your customer interactions and outcomes.
In summary, having a mentor can enhance your comfort level in building better and longer-lasting customer relationships by providing valuable knowledge, skill development, networking opportunities, emotional support, and guidance. Their guidance can help you navigate the complexities of customer management, leading to improved customer satisfaction, loyalty, and business success.
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Which one of the strategies below is more appropriate to be implemented in a company which is trying to increase its market share? a) Sell-out/Divestment strategy b) Profit strategy Liquidation d) Concentric diversification strategy
The Concentric diversification strategy is the most appropriate strategy to be implemented in a company which is trying to increase its market share. What is the Concentric diversification strategy A strategy of diversification is followed by the Concentric diversification strategy.
In this strategy, businesses diversify into products/services that are related to their current product/service line but have the potential to attract new clients. The Concentric diversification strategy is the best strategy for a business that seeks to increase its market share. A company that follows the Concentric diversification strategy is looking to grow its market share by diversifying its product or service line into new areas that are related to its current product or service line.
Concentric diversification helps the company to reduce the risk by developing related products that can be used by its current customers.Concentric diversification strategy is a way to reduce risk by developing new, related products for the same group of customers. The strategy is best suited for companies that want to increase their market share by expanding their product offerings. By diversifying into related products, companies can capture more of their existing customers' spending while also attracting new customers. This strategy works best when the new products or services are complementary to the existing products or services offered by the company.
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an industry in which the firms' cost structures do not vary with changes in production
The industry in which the firms' cost structures do not vary with changes in production is called a natural monopoly.
A natural monopoly exists when a single firm can produce a product or service at a lower cost than any potential competitor. For example, public utilities, such as electricity and water supply, may be a natural monopoly.
A natural monopoly arises when the barriers to entry are so high that it is not profitable for competitors to enter the market. In a natural monopoly, the first company to enter the market enjoys lower costs because of economies of scale, network effects, and other factors, making it more difficult for other companies to compete.
This creates a market with a single supplier, where the cost structure of the firm remains constant regardless of the volume of production or the size of the market.
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Problem 7-2 Cost-benefit analysis of cash management (L07-2] Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts y one-half day without affecting suppliers. The bank has a remote disbursement center in Florida. points
a. If Neon Light Company has $2.80 million per day in collections and $1.16 million per day in disbursements, how many dollars will the cash management system free up? (Enter your answer in dollars not in millions (e.g., $1,234,567).)
b. If Neon Light Company can earn 7 percent per annum on freed-up funds, how much will the income be? (Enter your answer in dollars not in millions (e.g., $1,234,567).) Interest on freed-up cash
c. If the total cost of the new system is $455,000, should it be implemented? O No Yes
The cash management system will free up $7,860,000.
How much money will the cash management system free up?Implementing the cash management system will free up a total of $7,860,000 for Neon Light Company.
By establishing local collection centers, the company can speed up payment collection by two days, resulting in an increased cash flow.
Additionally, by deferring payments on accounts by one-half day without affecting suppliers, the company can further optimize its cash management.
These measures allow the company to free up $2.80 million in collections per day and $1.16 million in disbursements per day.
With an annual interest rate of 7 percent, the company can earn income on the freed-up funds. Considering the total cost of the new system is $455,000, implementing it proves to be beneficial in terms of increasing cash availability and potential interest earnings.
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