Avon Products, Inc. is a leading manufacturer and marketer of beauty products and related merchandise. The company sells its products in 143 countries through a combination of direct selling and use of individual sales representatives. Presented here is a recent income statement (dollars in millions).
Net sales ....................... $8,763
Costs and expenses
Cost of sales ....................... 3,435
Selling, general and administrative ............ 4,368
Depreciation and amortization ................ 200
Operating income (loss) ................. 760
Interest and other income (expenses), net ........... (58)
Income (loss) before provision (benefit) for income taxes ... 702
Provision (benefit) for income taxes ............. 223
Net income (loss) ...................... $ 479
Its beginning and ending stockholders€™ equity was $794 and $760, respectively.

Required:
1. Listed here are hypothetical additional transactions. Assuming that they had also occurred during the fiscal year, complete the following tabulation, indicating the sign of the effect of each additional transaction (+ for increase, €“ for decrease, and NE for no effect)
Consider each item independently and ignore taxes.
a. Recorded and received additional interest income of $7.
b. Purchased $80 of additional inventory on open account.
c. Recorded and paid additional advertising expense of $16.
d. Additional shares of common stock are issued for $40 cash.

2. Assume that next period, Avon does not pay any dividends does not issue or retire stock, and earns 20 percent more than during the current period. Will Avon€™s ROE next period be higher, lower, or the same as in the current period?Why?

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Operating Income (Loss) Return on Transaction Net Income (a b. d.