chapter 5 quiz

A watchmaking company has priced one of its wristwatches at $210. Most of its competitors sell similar watches at $180. Selling anything less than $150 would result in a loss for the company. However, the absolute maximum a customer is willing to pay for it is $170. In this scenario, what is the reservation price of the wristwatch?

$170

which of the following is NOT true of risk capital

Risk capital invested in a firm can be legally recovered if the firm goes bankrupt.

The receivables turnover of VK products inc. is 13.6 & that of its competitor DL Goods Inc. is 6.0. What does this financial data primarily imply

VK products collects accounts receivables faster than AP goods does

Unlike the financial ratios based on accounting data, total return to shareholders is

an external performance metric

In 2014, Apple had a return on revenue of 29.3%, & Microsoft had a return on revenue of 32%. Even so, Apple had a higher return on invested capital than microsoft. Why did this happen?

apple was able to charge a much higher margin for its products & services than Microsoft

How does a firm capture its producer surplus for a good or service?

as profit per unit sold

The fixed asset turnover of a company is 8.3. What do you infer from this?

every dollar spent on the company's fixed assets generates $8.30 of revenue

_____ indicates how much a firm benefits from interest-free loans extended by its suppliers & creditors

payables turnover

the 3 financial ratios that constitute return on revenue are Cost of Goods sold/revenue, Research & development expense/revenue, and

selling, general, & administrative expense/Revenue

Return on risk capital primarily includes

stock price appreciation plus dividends received over a specific period.

A high percentage of R&D/Revenue ratio indicates a(n)

strong focus on innovation to improve current products and services

which of the following is not an accurate expression of the economic value created per unit of a product sold

the difference btwn the price charged & the firm's cost

The market capitalization of a public company is $5 billion. Each share of the company is traded at $200. What do you infer from this financial data

the firms # of outstanding shares is 25 million

After trying on a dress, a consumer accesses it to be worth a maximum of $100 & is willing to pay that amount for the dress. However, the dress was priced at $80. What is the amount, $100, referred to as

the value (v) the consumer attaches to the dress

A firm incurs $100 to manufacture an office table. It fixes the market price of the table as $250, and discounts the price to $200. However, the maximum a person is willing to pay for it is $180. What is the amount of total perceived consumer benefits in this scenario?

$180

Nicki paid $900 for a camera that she thought was worth $1100 for all the features included in it. For the consumer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario?

$200

Osion Electronics Inc. incurs a cost of $350 to produce one unit of a cell phone. The company's management has priced the product at $600 in the market. Considering the technological advancement of the cell phone, customers perceive its value to be around $800. What is the economic value created in this scenario?

$450

Milan is a recent fashion graduate. She started her own apparel store with an investment of $300,000. In the first year she made a profit of $60,000.f she had taken up a job as a fashion editor for a magazine, she would have earned $50,000 as salary per year. Also, she could have invested her capital, $300,000, in treasury bonds and earned an interest of $12,000. How much is the total opportunity cost?

$62,000

the working capital of a small home-based business is $200,000. The revenues generated account to $600,000, and the profits incurred are $300,000. What would be the company's working capital turnover

3, that is, $600,000/$200,000

In 2014, Apple turned over its inventory more than 53 times. In stark contrast, Microsoft turned over its inventory only about 10 times during the year. Which of the following best explains this difference?

Apple had a more effective management of its global supply chain than Microsoft

Which of the following statements is true of accounting data

accounting data are historical data & thus backward looking

A firm incurs $400 to manufacture a television. In the market, customers are willing to pay a maximum of $600 for the television priced at $500. The difference of $200 ($600 minus $400) is the

economic value created

the working capital turnover of Tesva Systems Corp. is 6.0. What does this financial data suggest?

for every dollar Tesva Systems put to work, the company realizes $6.00 of sales

Genevieve is a recent fashion graduate. She started her own apparel store with an investment of $300,000. In the first year she made a profit of $60,000. If she had taken up a job as a fashion editor for a magazine, she would have earned $50,000 as salary per year. Also, she could have invested her capital, $300,000, in treasury bonds and earned an interest of $12,000. Thus, the amount $62,000 ($50,000 + $12,000) would be Genevieve's

opportunity cost