AGEC EXAM #3
How do you know how your business is doing?
Dissect the budget and understand the business
What does opportunities represent in SWOT?
Elements in a company's external environment that allow it to formulator and implement to increase profitability
What do threats represent in SWOT?
Elements in the external environment that could endanger the integrity and profitability of the business
What are the two forms of capital expenditures?
Expenses to maintain levels of operation present within the company Expenses that will enable an increase in future growth
What are the four principles of organization design?
Keep the organizational structure simple Give critical tasks prominence and allow them to function without restriction Minimize support staff Keep work units small
What is Cash Flow Budget?
Summarizes the amount and timing of cash in and out of the business for the next budget period
What is central management?
best used in companies that prioritize their manufacturing strategy and reducing operating costs
What does capital expenditure refer to?
funds that are used by a company for the purchase, improvement, or maintenance of long-term assets to improve the efficiency or capacity of the company
What does a differentiated product provide?
higher prices
What is the real test of management commitment?
keeping the business competitive
What does the lowest-cost provider product?
lower prices
What are two sources of sustainable competitive advantage?
lowest cost provider and differentiated product
What is an example of tangible?
machine
What does weakness represent in SWOT?
make a business disadvantageous relative to competitors
What is competitive advantage?
what the business is going to do better than the other competitors
We need to know prices in order to calculate profitability
True
What does ROIC best measure?
long-run efficiency and effectiveness
List Porter's Five Forces
1. The threat of new businesses entering your market 2. The threat of new products entering your market 3. The growing bargaining power of suppliers 4. The growing bargaining power of buyers 5. The level of rivalry among existing firms in the industry
What are three ways to organize?
Business Function By Product By geographic area
What are the three parts of a strategic plan?
Business vision statement The strategic plan Implementation of the strategic plan
All three budget are not tied to the marketing plan
False
Budgets do take the place of good management
False
Execution of a budget is automatic
False
Market opportunities will lower ROIC
False
Strategic Planning is not an ongoing process and never ends
False
Written goals and budgets can't keep people focused and gives you something to compare
False
capital expenditures budget is typically not constrained by the cash flow and operating budgets
False
What is part of the internal environment?
Firm's strengths and weaknesses
What is part of the external environment?
Market opportunities and threats
What are the three types of budgets?
Operating Cash Flow Capital Expenditure
What is key in budgeting?
Planning
Sales estimates drive the operating budget, cash flow budget, and capital expenditure budget
True
What does the strategic plan involve?
SWOT Analysis
What is operating budget?
Summarizes the expected sales, production, and profit and related costs for the next budget period
What is Capital Expenditure Budget?
Summarizes the plant, property, and equipment expenses for the next budgetary period
What are the four elements of a sustainable competitive advantage?
Superior efficiency Superior quality Superior innovation Superior customer responsiveness
What does economically efficient mean?
The level of output that will generate the greatest profits
What is incremental analysis?
The technique of comparing added costs to added returns to find the most profitable production levels
The firm's strengths will raise ROIC
True
The firm's weaknesses will lower ROIC
True
A budget needs to be written down
True
A capital expense can either be tangible or intangible
True
As incremental revenue is greater than incremental costs, you expand until they are equal
True
Bigger is not always more profitable
True
Both intangible and tangible capital expenditures are usually considered assets since they can be sold when there is a need
True
Budgeting is great advice for life and business
True
Budgets are estimates, not sure things
True
Good budgeting requires time and patience
True
Market disruption and innovation always occurs in a strategic plan
True
Market threats will lower ROIC
True
What question is asked during a business vision statement?
What does the business aspire to be?
What are the three decisions asked in production?
What to produce? How to produce? How much to produce?
What is a budget?
a blueprint for action for a specific period that is based on sales, costs, and productivity estimates developed in the marketing plan
What does incremental refer to?
additional returns and costs from producing the next unit output
What is the Equivalent-marginal Allocation Principle?
any limited input should be allocated between two or more products so that the total profit cannot be increased by taking one unit away from one product and using it to produce another
What does diminishing marginal product reveal?
as inputs are added, they become less and less productive over time
What is the production function?
describes the technical relationship between inputs and outputs by summarizing the physical output possible from different levels of physical inputs
What does Decentralized organization involve?
dispersing decision-making powers among multiple employees or departmental teams
What does strategic management look at?
effectively developing staff and resources to achieve these goals
Production is
essential
What is a value statement?
explains how the business and all its employees are going to conduct themselves
What does strength represent in SWOT?
give a business advantage over its competitors
What is key for a strategic management?
good implementation
What is the goal of economic efficiency?
maximize profit, not production
What does technically efficiently mean?
maximum output from each unit of input
What are two ways to measure performance?
measure against the goals you set for your business measure against the competition
What is a centralized organizational structure?
one that relies heavily on top-down decision-making
What is an example of intangible?
patent
What doesn't ROIC stand for?
return on invested capital
What does SWOT stand for?
strengths weaknesses opportunities threats
What does production need to be?
technically and economically efficient
What is the average product?
the average output produced by each input
What does the exercise of developing and writing the budget give managers?
the best chance for success
What does a mission statement define?
the business purpose and objective
What is the marginal product?
the contribution of each unit of input to output
What does budget defined?
the financial plan of management's expectations for the business in the future
What is strategic management?
the process of setting goals, procedures, and objectives in order to make a company or organization more competitive
A great plan with poor execution is the same as having no plan
true
Cash Flow Budget is developed after the operating budget
true
The implementation of a strategic plan can be the hardest part of the process
true
You must have both the lowest cost provider and differentiated product to survive today
true