1.

Midyear on July 31st, the Digby Corporation's balance sheet reported:

Total Assets of $169.875 million

Total Common Stock of $5.080 million
Cash of $8.040 million
Retained Earnings of $36.188 million

What were the Digby Corporation's total liabilities?

Select: 1
$128.607 million
$120.567 million
$133.687 million
$136.647 million

Answer:
Total Liabilities = Total Assets – (Retained Earnings + Total Common Stock)
$169,875 – ($36,188 + $5,080) = $128,607

2. Last year the Chester Company increased their equity. In 2011 their equity was
$49,954. Last year (2012) it increased to $52,586.

What are causes of change in equity? Check all that apply.

Select: 3
Profits of $10,492
A change in cash of -$4,663
Change in inventory of-$471
A change in short term debt of-$4,846
A change of plant and equipment of$10,100
Plant Improvements of $10,100
Dividend payment of$6,353
Issue and retirement of stock
An accounts payable change of$1,248
Depreciation of -$38,653
A bond issue of$1,599

Answer:
Equity = Stocks/Dividends/Profits

3. Review the Inquirer to determine Chester’s current strategy. Where will they seek a
competitive advantage? From the following list, select the top five sources of
competitive advantage that Chester would be most likely to pursue.
Select: 5
Seek high automation levels
Add additional products
Increase demand through TQM initiatives
Seek the lowest price in their target market while maintaining a competitive
contribution margin
Offer attractive credit terms
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
Seek high plant utilization, even if it risks occasional small stockouts
Reduce cost of goods through TQM initiatives
Reduce labor costs through training and recruitment

4. The Andrews Company has just purchased $56,859,000 of plant and equipment that
has an estimated useful life of 15 years. Suppose at the end of 15 years this plant and
equipment can be salvaged for $5,685,900 (1/10th of its original cost). What will be
the book value of this purchase (excluding all other Plant and Equipment) after its
first year of use? Use generally accepted (FASB) accounting principles.

Select: 1
$53,068,400
$47,761,560
$53,447,460
$51,173,100

5. Rank the following companies from high to low cumulative profit, (in descending
order, 1=highest, 4=lowest).
Rank in order from 1 to 4
Andrews
Baldwin
Chester
Digby

Answer:
 Chester ($10,492)
 Andrews ($4,626)
 Digby ($3,069)
 Baldwin ($2, 896)

6. Which description best fits Baldwin 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?

Select: 1
Baldwin is a broad differentiator
Baldwin is a broad cost leader
Baldwin is a niche differentiator
Baldwin is a niche cost leader

7. What is the Working Capital of Chester?

Select: 1
$19,629
 -$11,195
$30,824
-$19,629

Answer: Working Capital = Total Current Assets – Accounts Payable – Current Debt =
$41,391 - $7,744 - $14,018 = $19,629

8. Chester has a leverage of 1.83. This means that:

(Assume leverage is calculated as Assets/Equity)
Select: 1
$1.83 of assets is funded with $1.00 of debt and $0.83 of equity.
$1.83 of assets is funded with $1.00 of equity and $0.83 of debt.
Assets are funded with 83% equity.
Assets are funded with 83% debt.