Chapter 21, Problem 1BCQ

To determine

The reason it was profitable Montgomery Ward to close stores during the Great Depression.

Introduction: The Great depression was a period of economic collapse and downturn. It is often regarded as the world’s worst downturn in the economic history of mankind. It was largely caused by the profits corporations attempted to make while the average wage grew incrementally; this widened the income gap between the classes.

Explanation of Solution

Montgomery Ward was able to keep revenue levels high to maintain profits since it closed stores. Closing stores meant that the expenses of the company would decrease. Since the rate of revenue of the retail industry was significantly low at the time, Montgomery Ward considered it a method of protection to accumulate cash currency with the company itself.

Thus, as the Depression settled Montgomery ward had capitals to fund the acquisition of new stores and outlets and since the market was only recovering and feeble, the company was able to find inputs at low costs. With restricted market environments and defensive actions of the management, the company was able to flourish in the post-Depression period.