(Solution) - QAF Company is a clothing retailer with locations in major -(2025 Original AI-Free Solution)

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QAF Company is a clothing retailer with locations in major Canadian cities. Its stock is publicly traded. In 2008 and 2009, the company?s financial performance was less than stellar, as shown in the table below.

Operating profit margin is the ratio of after-tax operating profit divided by sales. ROA is equal to after-tax operating profit divided by average total assets. Days of A/R is the balance of A/R at year-end divided by credit sales and multiplied by 365 days.
In response to declining performance, the company?s board of directors decided to initiate an incentive compensation plan starting in fiscal year 2010. The incentive plan provides for management bonuses based on the following formula:
Bonus = $500,000 X (Operating profit margin - 4%)
Required:
Provide plausible reasons why' the company' is performing poorly despite the new incentive compensation plan.