Which of the following global changes could explain the increase in the 2004 expense ratio for Zahra’s Coffee Imports Pty Ltd?
(A) A depreciation of the Australian dollar
(B) An appreciation of the Australian dollar
(C) Widespread dumping of coffee due to excess supply
(D) A new free trade agreement with one of the countries supplying this company - HSC - SSCE Business Studies - Question 5 - 2004 - Paper 1
Question 5
Which of the following global changes could explain the increase in the 2004 expense ratio for Zahra’s Coffee Imports Pty Ltd?
(A) A depreciation of the Australian ... show full transcript
Worked Solution & Example Answer:Which of the following global changes could explain the increase in the 2004 expense ratio for Zahra’s Coffee Imports Pty Ltd?
(A) A depreciation of the Australian dollar
(B) An appreciation of the Australian dollar
(C) Widespread dumping of coffee due to excess supply
(D) A new free trade agreement with one of the countries supplying this company - HSC - SSCE Business Studies - Question 5 - 2004 - Paper 1
Step 1
A depreciation of the Australian dollar
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Answer
A depreciation of the Australian dollar would make imports more expensive, thereby increasing the expense ratio for Zahra's Coffee Imports Pty Ltd. This is because a weaker dollar means that more Australian dollars are needed to purchase the same amount of foreign goods, such as coffee.
Step 2
An appreciation of the Australian dollar
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Answer
An appreciation of the Australian dollar would generally decrease the expense ratio since imports would be cheaper, thus making this option unlikely to explain an increase in expenses.
Step 3
Widespread dumping of coffee due to excess supply
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Answer
Widespread dumping of coffee could potentially lower prices due to excess supply in the market. This would typically decrease the expense ratio, making this option less likely as a cause for an increase.
Step 4
A new free trade agreement with one of the countries supplying this company
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A new free trade agreement might lower tariffs and trading costs, which would likely decrease expenses rather than increase them. Hence, this option does not explain an increase in the expense ratio.
