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
- 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?
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