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