Marina Manages the Supply Chain for a Company That Sells

question 44

Multiple Choice

Marina manages the supply chain for a company that sells diamond watches. She learns that economists are predicting a moderate to severe recession in the next six to eight months. Based on that information, what action should Marina recommend to the company's owner?

• A) Increase supply. During recessions, businesses that focus on low-cost solutions make significant profits.
• B) Reduce supply. Customers generally reduce their purchases of luxury items when the economy falters.
• C) Maintain the supply at its current rate. Economic forecasts are rarely accurate.
• D) Wait six months and see what happens. Recessions rarely affect consumer spending.

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Definitions:

Excess Cash

Cash that exceeds the normal operating needs of a business and is available for investing or returning to shareholders.

Stock Repurchase

A corporate action in which a company buys back its own shares from the marketplace, reducing the amount of outstanding stock.

Stock Split

A corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares.

Par Value

The nominal or face value of a bond, share of stock, or coupon as stated by the issuing entity, which may not reflect market value.