Strategic Management-Chapter 8

What is the most common type of financial budget? A) Cash B) Sales C) Profits D) Factory E) Flexible

A) Cash

After completing an EPS/EBIT analysis, what conclusions would you make if the debt line is above the stock line throughout the range of EBIT on the graph? A) Debt appears to be the best financing alternative. B) Stock would be the best financing alternative. C) A combination of debt and stock is probably the best financial alternative. D) Dividends must be considered before conclusions can be made. E) The company should be privately owned.

A) Debt appears to be the best financing alternative.

What percent of strategies formulated are successfully implemented? A) Less than 10 percent B) About 30 percent C) Between 40 and 60 percent D) Approximately 66 percent E) More than 80 percent

A) Less than 10 percent

What entails developing schematic representations that reflect how your products or services compare to competitors' on dimensions most important to success in the industry? A) Perceptual mapping B) Market segmentation C) Market penetration D) Unrelated diversification E) Capital budgeting

A) Perceptual mapping

What becomes a more attractive financing technique when cost of capital is high? A) Stock issuance B) Debt C) Cost cutting D) Borrowing E) Staying privately owned

A) Stock issuance

The attitude of U.S. firms toward research and development is best described by which of the following? A) The veil of secrecy is being lifted, resulting in more collaboration. B) Firms are more cutthroat than ever and less cooperative with each other. C) Firms are less interested in working with universities. D) Firms are feeling less competitive pressure. E) Firms are less involved with research consortia than ever.

A) The veil of secrecy is being lifted, resulting in more collaboration.

Which of the following is NOT true regarding stock issuances? A) They are always better than debt for raising capital. B) Their effect on stock price is a concern. C) They can require a company to share future earnings with all new shareholders. D) Dilution of ownership is a special concern. E) All of the above statements are true.

A) They are always better than debt for raising capital.

In the context of a balance sheet, goodwill represents A) a premium paid over the book value of an acquisition. B) the value attached to a firm's reputation. C) the excess of assets over liabilities. D) the value associated with benefits from environmental programs. E) the excess of current assets over liabilities.

A) a premium paid over the book value of an acquisition.

Retained earnings is obtained by subtracting A) any dividends to be paid for that year from net income. B) net income from EBIT. C) taxes from EBIT. D) interest expense from EBIT. E) EBIT from CGS.

A) any dividends to be paid for that year from net income.

In low-earning periods, too much ________ in the capital structure of an organization can endanger stockholders' return and jeopardize company survival. A) debt B) liquidity C) equity D) cash E) tax liability

A) debt

Perhaps the most dramatic new market segmentation strategy is the A) targeting of regional tastes. B) focusing on universal product. C) preference of international over domestic sales. D) treatment of industrial markets. E) none of the above

A) targeting of regional tastes.

A benefit of using projected balance sheets and income statements is that A) the impact of various implementation decisions can be forecasted. B) money can be put aside to pay future income taxes. C) insurance needs can be computed. D) it is useful in analyzing past performance. E) all of the above

A) the impact of various implementation decisions can be forecasted.

All of the following are examples of marketing decisions that may require policies EXCEPT A) to be a market leader or follower. B) how to make advertisements more interactive to be more effective. C) to offer a complete or limited warranty. D) to use heavy, light, or no TV advertising. E) to use exclusive dealerships or multiple channels of distribution.

A) to be a market leader or follower.

How should financial budgets be thought of? A) As a tool for limiting expenditures B) As a method for obtaining the most productive and profitable use of an organization's resources C) As a method for rationing the profits from the past year D) As a method for determining who should receive the largest pay raise E) As a tool for forecasting future profits

B) As a method for obtaining the most productive and profitable use of an organization's resources

What is the most widely used technique for determining the best combination of debt and stock? A) Debt-to-stock ratio B) Earnings per share/earnings before interest and taxes analysis C) Gross profit analysis D) Capital asset pricing model E) Present value analysis

B) Earnings per share/earnings before interest and taxes analysis

Which variable would be considered part of the "product" element of the marketing mix? A) Advertising B) Packaging C) Payment terms D) Inventory levels and location E) Publicity

B) Packaging

Which is NOT a required step in perceptual mapping? A) Select key criteria that effectively differentiate products or services in the industry. B) Serve two segments with the same strategy. C) Plot major competitors' products or services in the resultant matrix. D) Identify areas in the positioning map where the company's products or services could be most competitive in the given target market. E) Develop a marketing plan to position the company's products and services appropriately.

B) Serve two segments with the same strategy.

Which of the following is true about two different market segments? A) They can usually be served with the same marketing strategy. B) They usually require different marketing strategies. C) They are always in different geographic locations. D) They are usually interchangeable. E) All of the above

B) They usually require different marketing strategies.

An area on a perceptual map without ideal points indicates a A) market segment. B) demand void. C) vacant niche. D) multidimensional scale. E) product reposition.

B) demand void.

Business analytics A) is retrospective rather than predictive. B) enables a firm to learn from experience and to make current and future decisions based on prior information. C) uses mathematical models that enhance decision making at only the topmost levels of management. D) can enable a company to benefit from measuring risk, but it cannot enable the company to manage risk. E) as an industry is experiencing a decline in revenue.

B) enables a firm to learn from experience and to make current and future decisions based on prior information.

Evaluating the worth of a firm A) is an exact science. B) requires both qualitative and quantitative skills. C) is based solely on financial facts. D) is known only to the firm's accountants.

B) requires both qualitative and quantitative skills.

Which of these is NOT a rule of thumb when using product positioning as a strategy-implementation tool? A) "The best opportunity might be an unserved segment." B) "Look for the hole or vacant niche." C) "Try to serve more than one segment with the same strategy." D) "Don't position yourself in the middle of the map." E) All of these are valid rules of thumb.

C) "Try to serve more than one segment with the same strategy."

Which of these is the most common type of budgeting time frame? A) Daily B) Quarterly C) Annual D) Every decade E) Monthly

C) Annual

Which statement is NOT true? A) Having an effective management information system may be the most important factor in differentiating successful from unsuccessful firms. B) Like inventory and human resources, information is now recognized as a valuable organizational asset that can be controlled and managed. C) Computer vulnerability has been eradicated by recent innovations, and it is now possible to secure and safeguard all corporate communications, files, and business conducted over the Internet. D) In many firms, information technology is doing away with the workplace and allowing employees to work at home or anywhere, anytime. E) Improved quality and service often result from an improved management information system.

C) Computer vulnerability has been eradicated by recent innovations, and it is now possible to secure and safeguard all corporate communications, files, and business conducted over the Internet.

Which of the following is NOT an accepted approach for determining a business' worth? A) Determining what the firm owns B) Determining what the firm earns C) Determining what the firm's return on investment has been D) Determining what the firm will bring in the market E) All of the above are accepted approaches.

C) Determining what the firm's return on investment has been

If a firm incurs a loss during a particular year, or if the firm had positive net income but paid out dividends more than the net income, what happens to the RE amount? A) It increases. B) It is unchanged. C) It decreases. D) It doubles. E) It cannot be determined from the information given.

C) It decreases.

Why is market segmentation an important variable in the strategy-implementation process? A) Company strategies do not require increased sales through new markets and products. B) It allows a firm to operate with no resources. C) It directly affects marketing mix variables. D) It allows a firm to minimize per-unit profits and per-segment sales. E) All of the above

C) It directly affects marketing mix variables.

In preparing projected statements, to project cost of goods sold and the expense items in the income statement, which of these methods is recommended? A) Determining the net worth method B) What a firm earns method C) Percentage-of-sales method D) Price-earnings ratio method E) Outstanding shares method

C) Percentage-of-sales method

Which method of determining a firm's net worth divides the market price of the firm's stock by the annual earnings per share, and multiplies this number by the firm's average net income for the past five years? A) Debt/equity method B) Current ratio method C) Price-earnings ratio method D) Long-term asset method E) Outstanding shares method

C) Price-earnings ratio method

Which of the following variables is NOT directly affected by market segmentation? A) Product B) Place C) Process D) Promotion E) Price

C) Process

In projected financial statements, what is used as a plug figure? A) Retained earnings B) Fixed assets C) The cash account D) Long-term liabilities E) Stockholders' equity

C) The cash account

A conservative rule of thumb is to establish a business' worth as ________ the firm's current annual profit. A) twice B) three times C) five times D) ten times E) fifteen times

C) five times

The Financial Accounting Standard Board (FASB) Rule 142 deals with A) illegal inflation of financial projections. B) hacking issues in MIS. C) goodwill. D) how firms conduct R&D. E) improving marketing policies.

C) goodwill.

Projected financial analysis is an important strategy-implementation technique because A) it is an exact measurement of financial costs in the future. B) it is an exact measurement of future company profits. C) it allows an organization to examine the expected results of various actions and approaches. D) insurance needs can be computed. E) none of the above

C) it allows an organization to examine the expected results of various actions and approaches.

R&D employees and managers perform all of the following tasks EXCEPT A) transferring complex technology. B) altering products to particular tastes and specifications. C) researching resource availability. D) adapting processes to local markets. E) adjusting processes to local raw materials.

C) researching resource availability.

If an initial stock issuance is $800,000, what would be the expected cost paid to lawyers, accountants, and underwriters, based on the average for IPOs in this range? A) $20,000 B) $40,000 C) $80,000 D) $200,000 E) $400,000

D) $200,000

Which item is included in net worth? A) Retained earnings B) Common stock C) Additional paid-in-capital D) All of the above are included in net worth. E) None of the above are included in net worth.

D) All of the above are included in net worth.

Who has mandated that every publicly held company in the United States must issue an annual cash-flow statement in addition to the usual financial reports? A) SEC B) Congress C) FCC D) FASB E) OPEC

D) FASB

Which element in the projected income statement CANNOT be forecasted using the percentage-of-sales method? A) Cost of goods sold B) Selling expense C) Administrative expense D) Interest expense E) All of these items can be forecasted using the percentage-of-sales method.

D) Interest expense

What is a central strategy-implementation technique that allows an organization to examine the expected results of various actions and approaches? A) EPS/EBIT B) Financial budgeting C) TOWS analysis D) Projected financial statement analysis E) External analysis

D) Projected financial statement analysis

Which variable would be considered part of the "place" element of the marketing mix? A) Product line B) Service level C) Personal selling D) Sales territory E) Discounts and allowances

D) Sales territory

Matching which factors would allow factories to produce desirable levels without extra shifts, overtime, or subcontracting? A) Markets and competitors B) Competition and positioning C) Customer behavior and positioning D) Supply and demand E) Segments and competitors

D) Supply and demand

Subdividing a market into distinct subsets of customers according to their needs and buying habits is known as A) market penetration. B) product diversification. C) market segregation. D) market segmentation. E) positioning.

D) market segmentation.

Multidimensional scaling is used to determine A) the size of a new building. B) the size of a new department. C) the amount of high-tech equipment a firm needs. D) perceptual mapping. E) market segmentation.

D) perceptual mapping.

The first step in performing projected financial analysis is to A) prepare the projected balance sheet. B) take an inventory of goods. C) estimate increases in debt. D) prepare the projected income statement. E) calculate the projected net income.

D) prepare the projected income statement.

What is a limitation of using financial budgets? A) They can be so detailed that they are cumbersome and expensive. B) They can become a substitute for objectives. C) They can hide inefficiencies if done only on precedent. D) They are sometimes used as instruments of tyranny. E) All of the above

E) All of the above

What level of management is directly affected by strategy implementation? A) Plant managers B) Sales managers C) Project managers D) Division managers E) All of the above

E) All of the above

Why is market segmentation an important variable in strategy implementation? A) It allows a small firm to compete successfully with a large firm. B) It allows a firm to operate with limited resources. C) Mass production, mass distribution, and mass advertising are not always required. D) Market segmentation decisions directly affect marketing mix variables. E) All of the above

E) All of the above

Which two variables rank as marketing's most important contributions to strategic management? A) Diversification and budgeting. B) Marketing penetration and competition. C) Competition and collaboration. D) Product development and market development. E) Market segmentation and product positioning.

E) Market segmentation and product positioning.

Which of the following is NOT given as an example of a decision that may require finance/accounting policies? A) To extend the time of accounts receivable B) To establish a certain percentage discount on accounts within a specified period of time C) To lease or buy fixed assets D) To use LIFO, FIFO, or a market-value accounting approach E) To be a price leader or a price follower

E) To be a price leader or a price follower

Information collection, retrieval, and storage can be used to create competitive advantages in ways such as A) cross-selling to customers. B) monitoring suppliers. C) keeping managers and employees informed. D) coordinating activities among divisions. E) all of the above

E) all of the above