BPL 5100 Globus Quiz 2 (Part 1 and Part 2)
Quiz 2 Answers – Part 1
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 investor expected 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)
Quiz 2 Answers – Part 1
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 investor expected 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)
