1) The Chester Company has just purchased $40,900,000 of plant and equipment that has an estimated useful life of 15 years. The expected salvage value at the end of 15 years is $4,090,000. What will the book value of this purchase (exclude all other plant and equipment) be after its third year of use? (Use FASB GAAP)
2) What is the Quick Ratio of Chester?
3) Digby has a ROS of 0.09 (ROS = Net income/Sales). That means:
There are sales of $9 for every dollar of profit.
There is a 9% profit on each dollar of sales.
There are sales of $91 for every dollar of profit.
For every $9 of sales there is a profit of 1%.
4) Midyear on July 31st, the Baldwin Corporation’s balance sheet reported:
Total Liabilities of $103.453 million
Cash of $8.040 million
Total Assets of $172.520 million
Total Common Stock of $5.080 million.
What were the Baldwin Corporation’s retained earnings?
5) Review the Inquirer to determine Baldwin’s current strategy. How will they seek a competitive advantage? From the following list, select the top five sources of competitive advantage that Baldwin would be most likely to pursue.
Seek high plant utilization, even if it risks occasional small stockouts
Increase demand through TQM initiatives
Add additional products
Seek high automation levels
Offer attractive credit terms
Seek the lowest price in their target market while maintaining a competitive contribution margin
Reduce cost of goods through TQM initiatives
Seek excellent product designs, high awareness, and high accessibility
Accept lower plant utilization and higher capacities to insure sufficient capacity is available to meet demand
Reduce labor costs through training and recruitment
6) Rank the following companies from high to low cumulative profit, (in descending order, 1=highest, 4=lowest).
Rank in order from 1 to 4
7) Which description best fits Chester in your industry? 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 this competitor?
Chester is a niche cost leader
Chester is a broad differentiator
Chester is a broad cost leader
Chester is a niche differentiator
8) If Baldwin issued 1000 shares of common stock at last year’s end price, the effect on the balance sheet would be:
Retained earnings would increase by $4,804
Retained earnings would increase by $48,039
Equity would decrease by $4,804
Equity would increase by $48,039
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