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Group Exercises 5-1. The automobile and the steel industries have a high percentage of fixed costs in their cost structure. Given this cost structure, the student would expect a given percentage increase in sales would result in a greater percentage increase in profits (and conversely a given percentage decline in sales would result in a greater percentage decline in profits). Two group members should review statistical data in your college library for the automobile industry , and two members review the steel industry. Review the data over a three to five year period. For each of the years, for each industry, calculate the percentage change in profits against the change in the sales revenue. Make an analysis of the effect of a change in sales on overall industry profitability. Compare the results of the surveys of the two industries. 5-2. The stocks in the Dow Jones Industrial Average are listed in Barrons every week. Each member of your group should select two corporations. For each corporation do basic research and determine the answer to the following questions and give reasons for your answers:
5-3. Wal-Mart is listed in the text as a corporation with a high proportion of variable costs ( cost of goods sold) in its cost structure. The text also states that retail concerns have a high percentage of variable costs in their cost structure. Search the Securities and Exchange corporate filings data base -- EDGAR. (www.sec.gov/edgarhp.htm) for the financial statements of major retail merchants. The form which provides the most relevant information is the 10-K. Review the 10-K forms over three years for the retail concern selected. Calculate how the corporation's costs have changed as sales have changed. In particular review the cost of goods sold as a percentage of sales for the retail concern over the time period. Also calculate the other major cost categories as a percentage of sales over the time period . Your group should select two retail corporations and compare and contrast the results. (Two members select one corporation-the other two members select another.) Retail corporations include: J.C. Penny, Federated., and May Department Stores. 5-4. The Airline industry has high fixed costs. It is also a cyclical industry since the state of the economy is an important determinant of the number of passengers who fly. Search the Securities and Exchange corporate filings data base -- EDGAR. (www.sec.gov/edgarhp.htm) for the financial statements of major airlines. The form which provides the most relevant information is the 10-K. Review the 10-K forms over three years for the airline selected. Calculate how this corporation's costs have changed as sales revenue changed. Calculate the other major cost categories as a percentage of sales over the time period. Your group should select two airlines,and compare and contrast the results. Two members select one airline- two other members select another. Examples of airlines are: Delta, Southwest, AMR (American Airlines), and Continental. |
