You're the CFO of the Kraknee Roller Skate Company, which sells roller skates worldwide and also builds and operates roller rinks. Some time ago Archie Speedo, the head of international marketing proposed selling skates in Russia. Everyone thought he was crazy, but the idea turned out to be very successful. Archie lined up a talented Russian importer who managed to sell more skates than anyone imagined possible. Now Archie has proposed a new Russian venture. He wants to open and operate a roller rink in Moscow. He says that since the breakup of the Soviet Union, Russians are interested in Western pastimes and a roller rink in the capital city would make a fortune. Based on his earlier success in Russia, the rest of the executive team is in favor of the idea. You, however, have some concerns. Write a memo explaining how the roller rink proposal differs from exporting skates to Russia, and what problem is likely to exist even if the venture is as commercially successful as the skates. What other risk is involved?
Answer to relevant QuestionsDuring the last year Alpha Co had Net Income of $150, paid $20 in dividends, and sold new stock for $40. Beginning equity for the year was $700. Calculate ending equity. Why don't we calculate the total difference in the equity accounts between the beginning and end of the year and consider that difference as a source or use of cash? Why do we similarly exclude the cash account? Comment on the value of the formula (EFR) approach to estimating funding requirements. Could it create more problems than it solves? Why did credit default swaps make the crisis worse? An American importer owes vendors the following sums a. 140,560 Canadian dollars b. 392,000 Australian dollars c. 1,362,000 Mexican pesos d. 680,540 British (U.K.) pounds e. 14,673 Euros State each debt in U.S. dollars.
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