CH. 5 Policy
Which of the following statements are true concerning a firm's business model? (Check all that apply.) It details the firm's competitive tactics and initiatives. It indicates the way the firm works with buyers and suppliers. It essentially explains how the firm intends to make money. It reports the firm's latest accounting profitability.
It details the firm's competitive tactics and initiatives. It indicates the way the firm works with buyers and suppliers. It essentially explains how the firm intends to make money.
True or false: The best measure of competitive advantage can be found in the performance of specific departments.
false
Fixed costs are Blank______ consumer demand. directly proportional to inversely proportional to reduced by independent of
independent of
To understand how effectively a firm uses its capital, one can use the ratio ______. net profits/invested capital COGS/revenue R&D/revenue revenue/accounts payable
net profits/invested capital which is ROIC!!
When a firm does favorably compared to similar firms, it is said to Blank______. go out of business outperform file for bankruptcy set a benchmark
outperform
Which of the following are considered off-balance sheet items? pension obligations operating leases owned assets cash
pension obligations operating leases
Another name for producer surplus is______
profit
Which of the following performance dimensions matter in judging the effectiveness of a firm's strategy? international qualitative quantitative natural
qualitative quantitative
When a company offers video-game consoles at a steep discount, but charges customers high fees for games, they are operating on a Blank______ business model. wholesale motivator-motivation razor-razor blade pay-as-you-go
razor-razor blade
From the view of a shareholder, the measure of competitive advantage that matters most is return on Blank______. risk capital assets revenue invested capital
risk capital
Managers implement the blueprint of their business model through which of the following? structures processes culture voice memos
structures processes culture
To determine a product's producer surplus, which of the following must be compared? sunk costs total cost of production price charged the overhead costs
total cost of production price charged
In general, a firm generates ______ when its cost of capital is lower than its ROIC. competition debt overhead value
value
The balanced scorecard approach helps managers balance Blank______ goals. financial and strategic fixed and variable advantaged and disadvantaged opportunity and transitional
financial and strategic
The money a firm spends to set up a sales website can be considered a Blank______ cost. variable fixed sunk marginal
fixed
When you join the vehicle sharing company Zoooomm, you are allowed to use a motorized scooter whenever you like, though you do not have to own the machine. You have to pay by the hours of usage. Zoooomm operates on a Blank______ model. pay-as-you-go subscription-based triple bottom line razor-razor blade
pay-as-you-go
The pay-as-you-go model is ______. dying out becoming increasingly niche difficult to apply outside its traditional functions gaining momentum
gaining momentum
Investors in a company are mostly concerned about the company's Blank______. planned emergence total return to shareholders return on invested assets opportunity cost
total return to shareholders
When implementing the razor-razor blade strategy, companies make their profit from Blank______. complementary goods initial products razors subscription fees
complementary goods
With a(n) Blank______, firms describe how they turn strategy into action. business model triple bottom line scorecard plan VRIO framework
business model
When a firm goes bankrupt, shareholders Blank______. can sue for loses are entitled to help pay off debtors owed money by the firm are entitled only to a fraction of their investment cannot recover their risk capital
cannot recover their risk capital
True or false: The freemium business model can be considered an evolutionary variation on the razor-razor blade model.
true
Which of the following would be labeled variable costs by a computer manufacturer? display screens hard drives manufacturing facilities the administrative assistant
display screens hard drives
If a firm has a successful Blank______ strategy, its product will have a higher perceived value and the firm will have a competitive advantage over a competitor that creates a product at equal cost but with a lower reservation price. product differentiation freemium stock invested capital
product differentiation
The business model used by telecommunication companies when they provide a basic cell phone at no charge when the customer signs a two-year contract is a combination of which of the following types of business models? freemium pay-as-you-go subscription razor-razor blade
subscription razor-razor blade
The Luminarium Corporation has a market capitalization of $100,000,000, and each share is worth $100. How many outstanding shares of Luminarium Corporation are there? 1,000,000 50,000,000 10,000,000 1,000
1,000,000
Which of the following are standard performance dimensions for a company? (Check all that apply.) a firm's accounting profitability how much economic value a firm generates how much shareholder value a firm creates the fixed and variable costs how a firm's mission statement relates to its strategic intent
a firm's accounting profitability how much economic value a firm generates how much shareholder value a firm creates
According to the efficient-market hypothesis, information about which of the following is embedded in a stock price? a firm's past a firm's political views expectations of the firm's future performance a firm's current state
a firm's past expectations of the firm's future performance a firm's current state
In a subscription-based business model, customers pay for ______. an agent to sell a product access to a product or service premium service actual usage
access to a product or service
When competitive advantage is assessed from an analysis of publicly available data, a firm measures its Blank______. economic value created triple bottom line accounting profitability balanced scorecard
accounting profitability
Netflix had a successful business model based on a large library of streaming content but then achieved even more success by also producing and distributing original content. This is an example of the potential value of ______. revenue depreciation business model innovation consumer cost sharing overhead maximization modeling
business model innovation
The financial metric ROIC stands for return on invested ______
capital
Combining the razor-razor blade model and the subscription model means that telecom providers make their money through lengthy service plans, which in turn means that it is crucial that they keep their Blank______ rate, or the proportion of subscribers who leave, down. agency churn freemium scorecard
churn
The firm's accounting profitability, ability to create shareholder value, and ability to generate economic value tend to be ______. unrealistically bound unrelated perpendicularly related correlated
correlated
Compared to the past, the importance of firms' intangibles has increased. Therefore the importance of a firm's book value has Blank______ as part of the firm's total stock market valuation. stayed the same increased ceased to matter decreased
decreased
The difference between the cost of producing a product and the price consumers are willing to pay for that product is known as Blank______. economic value created overhead derivative pricing stock price appreciation a profit margin
economic value created
To measure firm-level competitive advantage, a company must Blank______. offer hundreds of products within individual strategic business units estimate the economic value created for all products and services offered by the firm diversify conglomerate offerings and assessment differentiate products in more diversified markets
estimate the economic value created for all products and services offered by the firm
For a product that has a large economic value, a firm can choose to charge the same price as competitors in order to Blank______. gain market share cover opportunity costs increase return on invested capital maximize profit
gain market share
For a product that has a large economic value, a firm can choose to charge the same price as competitors in order to Blank______. gain market share maximize profit cover opportunity costs increase return on invested capital
gain market share
In order to be considered a legal owner of a public company, a person or organization must Blank______. own at least one share of the company's stock own a majority of the company's stock own at least two products manufactured by the company be a member of the company's board of executives
own at least one share of the company's stock
The subjectively determined maximum amount a customer would pay for a product is its Blank______ price. overwhelming unfair exploitative reservation
reservation
Which of the following are among the most commonly used metrics for comparing the performance of different companies? (Check all that apply.) return on revenue return on equity return on strategic intent return on assets return on opportunity
return on revenue return on equity return on assets
In order to determine market capitalization, one multiplies which of the following together? total market value share price number of outstanding shares value of the dollar
share price number of outstanding shares
Which of the following would provide the best benchmark of a computer firm's performance relative to other high-tech firms? the Dow Jones Industrial Average the NASDAQ computer index the S&P 500 the value of the yen
the NASDAQ computer index
When managers analyze a wide variety of internal and external performance metrics in order to set financial and strategic goals, they often turn to a framework known as Blank______. strategic emergence the balanced scorecard the accounting metric framework shareholder analysis
the balanced scorecard
Public companies are required by law to release detailed accounting data, which enables Blank______. shareholder value creation economic value creation comparative analysis of firms a balanced scorecard system
comparative analysis of firms
A firm's actual Blank______ minus depreciation is called the book value. costs of assets outstanding stock value market valuation market capitalization
costs of assets
Economic value created is the Blank______ the cost to produce a product/service and the amount the buyer is willing to pay for it. difference between greater of either total sum of lesser of either
difference between
A company's total return to shareholders consists of which of the following? dividends received capital depreciation stock price appreciation wages
dividends received stock price appreciation
Which of the following dimensions make up the triple bottom line? ecological economic social international
ecological economic social
Which business model evolved from the razor-razor blade model and involves a firm providing a base product for free, then finding ways to monetize the usage? the freemium business model the pay-as-you-go business model the bundling business model the subscription business model
the freemium business model
The most a consumer is willing to pay for a product is equivalent to the product's Blank______. price relative to all costs, including overhead traceable asset value on the stock exchange economic value created total perceived consumer benefits
total perceived consumer benefits
If Firm A and Firm B both produce a laptop at the same total cost, but the reservation price for Firm A's laptop is $1,000 and the reservation price for Firm B's laptop is $1,200, who has the competitive advantage? no one Firm B the consumer Firm A
Firm B
Which statements about creating and implementing an effective business model are true? Firms must use a blueprint to come up with strategies for how the firms will compete in the market. Firms that wish to be truly innovative and original must avoid using a blueprint, which might be limiting. Firms must implement their competitive strategy blueprint through processes, procedures, culture, and structure. Firms must transform their competitive strategy into a blueprint of initiatives and actions that support their goals.
Firms must implement their competitive strategy blueprint through processes, procedures, culture, and structure. Firms must transform their competitive strategy into a blueprint of initiatives and actions that support their goals.
Which statements about the disadvantages of the value creation perspective are true? It is difficult to determine the value that consumers place on a given good. The value that a consumer places on a good can vary according to how the consumer feels at a particular moment. For large firms, it is difficult to estimate the economic value created for all products and services offered by the firm. The meaning of value creation differs between services and products.
It is difficult to determine the value that consumers place on a given good. The value that a consumer places on a good can vary according to how the consumer feels at a particular moment. For large firms, it is difficult to estimate the economic value created for all products and services offered by the firm.
Which statements about stock market valuations are true? Investors generally take a poor view of stock market valuation because it includes all shares in its calculation. Stock market valuation is the estimated increase in a stock's value during the next fiscal year. Viewed over the long term, stock market valuation is a useful metric for assessing competitive advantage. Stock market valuation is equal to the number of outstanding shares multiplied by the share price.
Stock market valuation is equal to the number of outstanding shares multiplied by the share price. Viewed over the long term, stock market valuation is a useful metric for assessing competitive advantage.
Which statements about stock market valuations are true? Stock market valuation is equal to the number of outstanding shares multiplied by the share price. Viewed over the long term, stock market valuation is a useful metric for assessing competitive advantage. Stock market valuation is the estimated increase in a stock's value during the next fiscal year. Investors generally take a po
Stock market valuation is equal to the number of outstanding shares multiplied by the share price. Viewed over the long term, stock market valuation is a useful metric for assessing competitive advantage.
Which of the following statements is true about a firm's stock price? The price is calculated exactly from the firm's accounting profitability. The price determines in part the stock's market valuation. The price tends not to reflect accounting profitability. The price is not correlated with the firm's economic value creation.
The price determines in part the stock's market valuation.
Which of the following industries use a subscription model? Internet providers cellphone providers magazines car rental
Internet providers cellphone providers magazines
Which of the following are true of a firm's book value? It is based on future valuations of a firm. It captures the historical cost of a firm's assets. Its importance has declined over time. It is calculated as costs of assets minus accumulated depreciation.
It captures the historical cost of a firm's assets. Its importance has declined over time. It is calculated as costs of assets minus accumulated depreciation.
True or false: Stock market valuations are often unreliable due to market fluctuations and are therefore not used to assess competitive advantage. True false
false
Which of the following are elements of the social dimension of the triple bottom line? improving recycling efforts human sustainability reducing overhead costs achieving work/life balance
human sustainability achieving work/life balance
Achieving competitive advantage means maximizing the difference between which two of the following? advertising costs the cost to produce the good or service the number of rival firms consumers' willingness to pay
the cost to produce the good or service consumers' willingness to pay
Which of the following statements is best illustrated by the decades-long business rivalry between the technology giants Apple and Microsoft? Once a company becomes highly dominant in its industry, it cannot be displaced. Technological change has little influence on a firm's competitive advantage. A company that shrinks to less than 10% market share cannot grow again significantly. A firm's competitive advantage is transitory.
A firm's competitive advantage is transitory.
Which of the following statements about the disadvantages of the accounting profitability perspective are correct? Accounting data focus primarily on tangible assets. Accounting data are highly volatile and thus difficult to use. Accounting data focus mostly on intangible assets. Accounting data are historical and therefore backward-looking.
Accounting data focus primarily on tangible assets. Accounting data are historical and therefore backward-looking.
Which of the following statements are true about the rival businesses Apple and Microsoft? (Check all that apply.) Apple introduced a series of popular consumer electronic devices. Apple's primary business for several decades was to sell computers to corporations. Microsoft leveraged its computer operating system to sell other software programs. Microsoft almost went bankrupt in late 1990s.
Apple introduced a series of popular consumer electronic devices. Microsoft leveraged its computer operating system to sell other software programs.
Which of the following is true about shareholders of a public company? Those qualified as owners must own at least 100 shares. They must be individuals who are employed by the company. They can be individuals or organizations. They are eligible to be elected as owners of the company.
They can be individuals or organizations.
When competitive advantage is assessed from an analysis of publicly available data, a firm measures its Blank______. triple bottom line accounting profitability economic value created balanced scorecard
accounting profitability
