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