Chapter 2 Retailing
A retailer has total assets of $6,000,000 and a net worth of $3,000,000. What is the retailer's financial leverage ratio? a. .5 times b. 2.0 times c. 50 percent d. 75 percent e. 100 percent
B
A retailer's retail mix consists of all of the following EXCEPT: a. location. b. price. c. customer service and selling. d. traffic strategy. e. merchandise.
D
It is necessary for retail firms to strive for high-profit performance results: a. so that average operating results can be obtained even if planned results cannot be accomplished. b. as a means of achieving the largest profit possible. c. a retailer need not strive for high profit performance results. d. so that new retailer entrepreneurs cannot enter the market. e. so that the managers can be allocated larger year-end bonuses.
A
Specialty stores typically have a _____ than discounters. a. lower asset turnover b. lower profit margin c. lower return on net worth d. lower market share e. lower return on net worth and lower market share
A
The Card Shoppe had a gross margin last year of $2,000,000 and a net profit of $300,000, while net sales were $2,500,000. What was The Card Shoppe's net profit margin for last year? a. 12.0 percent b. 15.0 percent c. 20.0 percent d. 68.0 percent e. 80.0 percent
A
The analysis that provides management with a critical view of the organization's position relative to its internal and external environment is known as: a. SWOT analysis. b. strategic window analysis. c. leverage analysis. d. retail audit. e. opportunities awareness.
A
The manager of a department store chose to use a percentage of the year's profits to help fund the Salvation Army's Thanksgiving Dinner for the Homeless. In reference to this sponsorship, the manager appears to have set what kind of objective? a. Benefactor objective b. Self-gratification objective c. Financial performance objective d. Status and respect objective e. Personal objective
A
When a retailer is attempting to determine its major advantage(s) over competitors, it is analyzing its: a. strengths. b. weaknesses. c. opportunities. d. threats. e. operations.
A
Which of the following is an incorrect statement regarding strategic planning? a. A short-term commitment of resources is required by strategic planning. b. The strategic planning process is started by assessing the external environment. c. Effective strategic planning can aid a retailer in contending with competitors. d. Strategic planning takes into consideration how a retailer responds to the environment. e. Ineffective strategic planning can lead to a decrease in a retailer's level of profitability.
A
Which of the following is not a step in the strategic planning process: a. develop action plans. b. perform a SWOT analysis. c. define specific goals and objectives. d. a well defined mission statement. e. strategy development
A
Which of the following would be an example of a market performance objective for Record World? a. Open or acquire five to ten stores over the next year. b. Increase this year's net profit margin by 3 percent over last year. c. Improve public relations with customers by holding two major in-store events per six-month season. d. Increase labor productivity by 12 percent over the next six months. e. Increase return on assets from 12 percent to 15 percent over the next 12 months.
A
A fully-developed retail marketing strategy specifies the: a. level of financial performance sought and mix of financial statement components. b. specific target market sought, location, the specific retail mix to be used, and the retailer's value proposition. c. consumer and channel member behavior. d. prices of goods to be sold. e. retail mix to be used, specific target market sought, and budget available.
B
A retail firm that is setting goals based on the analysis of its ability to provide a profit level adequate to continue in business is setting _____ objectives. a. liquidity b. financial performance c. profit performance d. market performance e. operating performance
B
As a general rule, retailers should strive for a financial leverage of: a. 1.0 to 2.0 times. b. 2.0 to 3.0 times. c. 3.0 to 4.0 times. d. 4.0 to 5.0 times. e. 5.0 to 6.0 times.
B
Chandler Markus is the store manager for a large discount drugstore. Chandler allows his department managers to arrange the fixtures and schedule their employees as they see fit. According to Chandler's actions, the drugstore has set what kind of objective? a. Benefactor objective b. Power and authority objective c. Space productivity objective d. Employee-centered objective e. Employee empowerment
B
Financial performance objectives can be broken into two categories: a. marketing objectives and operating objectives. b. profitability objectives and productivity objectives. c. administrative objectives and financial strategy objectives. d. human performance objectives and information objectives. e. seasonal objectives and general operating objectives.
B
For a mission statement to be effective, it should: a. be less than 10 words; after all, the more concise the mission statement, the more focused the company. b. provide a basic description of the fundamental nature, rationale, and direction of the firm. c. be changed annually to reflect changes in the environment. d. follow the strategy laid out annually by senior management. e. be developed only after the retailer sets its goals and objectives.
B
If a retailer has a return on assets of 15 percent and a net profit margin of 3 percent, then its rate of asset turnover is: a. .20 times. b. 5.0 times. c. 15.0 times. d. 30.0 times. e. 60.0 times.
B
If a retailer is assessing the remodeling needs of its stores, as well as evaluating the effect that the lack of a formal training program is having on the management of its establishments, the retailer is reviewing the firm's: a. strengths. b. weaknesses. c. opportunities. d. threats. e. operations.
B
Most smaller retailers have more control over this important factor for successes than larger retailers: a. promotional strategy. b. location. c. personnel. d. service levels. e. credit policies
B
Sales volume and market share are the most popular measures of: a. financial productivity. b. market performance. c. merchandise productivity. d. consumer choice. e. human resource allocation.
B
When a retailer sets goals and objectives based on a comparison of its actions against its competitors, it is establishing: a. financial performance objectives. b. market performance objectives. c. personal objectives. d. competitive pricing objectives. e. societal objectives.
B
Which of the following elements is NOT a part of the strategic profit model (SPM)? a. Net profit margin b. Stockouts c. Asset turnover d. Financial leverage e. Return on assets
B
As a general rule, retailers should strive for a net profit margin of: a. .05 to 1.5 percent. b. 1.5 to 2.5 percent. c. 2.5 to 3.5 percent. d. 3.5 to 4.5 percent. e. 4.5 to 5.5 percent.
C
Consider this mission statement: "Dad's Tasty Dogs will utilize the friendly, proven expertise of its employees and the finest ingredients to provide customers with great tasting hot dogs at a fair price." What element of a good mission statement is missing? a. How the retailer uses or intends to use its resources b. A market share goal c. How it expects to relate to the ever-changing environment d. The kinds of value it intends to provide in order to serve the needs and wants of the customer e. A SWOT analysis
C
If a retailer is attempting to determine which of the closely related areas of business are underdeveloped in its market, it is assessing its: a. strengths. b. weaknesses. c. opportunities. d. threats. e. operations.
C
If a retailer with an ROA of 7.0 percent decides to increase its financial leverage ratio from 1.5 times to 2.0 times, which of the following results will occur? a. The retailer's ROA will increase by 33 percent. b. The retailer's RONW will decrease by 33 percent. c. The retailer's RONW will go from 10.5 percent to 14.0 percent. d. The retailer's RONW will increase by .5 percent. e. The retailer's RONW will increase by 10.5 percent.
C
If net profit margin is 2.0 percent, the rate of asset turnover is 6.0x, and the financial leverage is 2.1, what is the return on assets? a. 0.333 percent b. 8.0 percent c. 12.0 percent d. 25.2 percent e. 33.0 percent
C
The aim of operations management is to: a. heighten customer service. b. advance the merchandise mix. c. maximize the performance of current operations. d. develop more effective long-term plans. e. increase a product's perceived value to the customer.
C
The retailer's _____ is a clear statement of the tangible and intangible results a customer receives from using the retailer's products or services. a. mission statement b. customer interaction tracker c. value proposition d. customer type indicator e. vision statement
C
Which of the following is NOT an example of a financial performance goal? a. Increase return on assets from 8 percent to 9 percent. b. Increase asset turnover from 2.5 to 2.8. c. Increase market share by 20 percent. d. Increase space productivity by 5 percent. e. Reduce financial leverage from 2.1 to 2.0.
C
You have recently been hired by a small retailer in your area. During a discussion with the owner, you notice that the owner's primary objective for being in business is to provide the customer with a real alternative. The owner is primarily using a _____ objective to focus the business. a. market performance b. financial performance c. societal d. personal e. self-esteem
C
_____ is the anticipation and organization of what needs to be done to reach an objective. a. Analyzing b. Forecasting c. Planning d. Strategic realignment e. Tactical adaptation
C
A retailer has a net profit of $1,000,000, total assets of $12,000,000, a 2.5 asset turnover ratio, and a net worth of $5,000,000. What is its financial leverage ratio? a. .083 times b. .500 times c. 2.00 times d. 2.40 times e. 4.80 times
D
As a general rule, retailers should strive for an asset turnover of: a. 1.0 to 1.5 times. b. 1.5 to 2.0 times. c. 2.0 to 2.5 times. d. 2.5 to 3.0 times. e. 3.0 to 3.5 times.
D
Financial performance goals and objectives does which of the following: a. Helps the firm's employees to fulfill dome of their own personal needs. b. Compares a firm's actions to its competition. c. Helps society to fulfill some of its needs. d. Analyzes the firm's ability to provide a profit level adequate to continue and grow in business. e. Helps stabilize the global financial market.
D
If a retail firm is attempting to determine the potential negative effects of a new competitor entering the market, it is assessing its: a. strengths. b. weaknesses. c. opportunities. d. threats. e. operations
D
If a retailer has a net profit margin of 3 percent, asset turnover of 4.0x, and financial leverage of 2.0x, then its return on net worth is: a. 6 percent. b. 8 percent. c. 12 percent. d. 24 percent. e. 48 percent.
D
If a retailer has set its primary objective as gaining 5 percent of market share, it is focusing on a _____ objective. a. productivity performance b. consumer choice c. merchandise productivity d. market performance e. competition-oriented
D
If net profit margin is 5.0 percent, rate of asset turnover is 4.0x, and financial leverage is 2.0x, then return on net worth is: a. 8.0 percent. b. 10.0 percent. c. 20.0 percent. d. 40.0 percent. e. 80.0 percent.
D
The beginning of a retailer's strategic planning process is the formulation of the retailer's: a. goals and objectives. b. opportunity analysis audit. c. alpha statement. d. mission statement. e. strategy statement.
D
The four basic types of objectives that a retailer can formulate are: a. financial, gross margin return on sales, return on assets, and return on net worth. b. equity, benefactor, consumer choice, and employment. c. sales volume, market share, productivity, and profitability. d. societal, market performance, personal, and financial performance. e. marketing performance, profitability, productivity, and societal.
D
When a retailer uses productivity objectives, it is referring to the productivity of which resources? a. Market comparison, profitability, productivity b. Net worth, financial leverage, and asset turnover c. Sales, merchandise, and owner's equity d. Space, labor, and merchandise e. space, owner's equity, and merchandise
D
Which of the following is NOT an aspect of a good mission statement? a. Broad and general in nature b. Provide direction c. Motivational d. Changes with every new fad e. It is a plan of action for the firm to follow
D
_____ signify what the retailer wants to accomplish, while _____ indicate how the retailer will attempt to achieve them. a. Objectives; mission statements b. Mission statements; plans c. Strategies; plans d. Objectives; strategies e. Action plans; strategies
D
A "retailer's cost management" strategy refers to: a. getting shoppers into the store. b. having the right merchandise, using the right layout and display, and having the right sales force. c. the small size of the retailers' stores which gives these advantages in negotiating leases in an industry with a surplus of stores, thus reducing their operating costs. d. having a low marginal cost, where the cost of selling one more unit does not significantly impact total costs, thus making them want to maximize revenue. e. getting shoppers and converting them into customers at the lowest operating cost possible that is consistent with the level of service that customers expect.
E
A retail firm that is setting goals based on its desire to help society fulfill some of its needs is developing _____ objectives. a. personal b. self-respect c. financial benefit d. self-esteem e. societal
E
Cameron Brody wants 15 percent of an average dollar invested in the assets of his bookstore to be returned in profit. Cameron is setting a(n) _____ financial objective. a. gross margin return on sales b. return on inventory c. return on net worth d. operating profit margin e. return on assets
E
Closure strategy is: a. often referred to as a "retailer's cost management" strategy. b. just getting shoppers into the store. c. getting shoppers in the store and converting them into customers at the lowest operating cost possible. d. often referred to as a retailer's traffic strategy. e. having the right merchandise, using the right layout and display, and having the right sales force.
E
If a retailer has an ROA of 10 percent and a financial leverage of 4.0, then its RONW would be: a. 0.4 percent. b. 6 percent. c. 14 percent. d. 26 percent. e. 40 percent.
E
Merchandise productivity: a. is net sales divided by the total square feet of retail floor space. b. states how many dollars in sales the retailer wants to generate for each square foot of store space. c. is net sales divided by the number of full-time-equivalent employees. d. reflects how many dollars in sales the retailer desires to generate for each full-time-equivalent employee. e. is net sales divided by the average dollar investment in inventory.
E
Strategic planning: a. requires a short-term commitment of resources by the retailer. b. is concerned with maximizing the efficiency of the retailer's use of resources and with how the retailer converts these resources into sales and profits. c. involves managing the buying and handling of merchandise, pricing, advertising and promotion, customer services and selling, and facilities. d. is concerned with how the retailer responds to the environment in an effort to establish a short-term course of action. e. involves adapting the resources of the firm to the opportunities and threats of an ever-changing retail environment.
E
Which of the following refers to a retailer's "traffic strategy"? a. Having the right merchandise, using the right layout and display, and having the right sales force b. Providing the appropriate level of service that the customers expect c. Getting shoppers and converting them into customers at the lowest operating cost possible d. Converting shoppers into customers by having them purchase merchandise e. Getting shoppers into the store
E
A "retailer's conversion" refers to getting shoppers in your store and converting them into customers, at the lowest operating cost possible that is consistent with the level of service that your customers expect
F
A SWOT analysis is actually the retail industry's term for an accounting audit
F
A retailer only needs to consider its strengths and environmental opportunities when formulating a strategic plan
F
As a general rule, a retailer should strive to have a net profit margin of 1.5 to 2.5 percent
F
As a general rule, a retailer should strive to have an asset turnover rate between 1.5 to 2.0 times
F
As a general rule, a retailer should strive to have its financial leverage between 3.0 and 4.0 times.
F
Goal statements should specify "how" a retailer intends to achieve a specific level of performance, as well as the "time period" allowed for achievement of the results.
F
Just having a written mission statement is enough for success in today's environment; after all, with all the changes taking place it would be foolish to expect a retailer to always adhere to its original mission statement
F
Managers are usually evaluated on financial leverage since return on assets is beyond their control
F
Many retailers think getting people to visit your website or your store is one of the easiest tasks in retailing
F
Most retailers like to operate with a financial leverage ratio of 1.0 or greater so as to minimize debt.
F
Net profit margin is calculated by dividing the retailer's net profits by markup in dollars.
F
Poorly managed operations can positively affect a retailer's profitabillity
F
Price promotions usually attract, and subsequently hold, customers.
F
Retail store managers often determine the location of their stores
F
Return on assets is net profit divided by owner's equity.
F
The actions of supply chain members typically do not impact a retailer's strategy.
F
The first step in strategic planning is to determine the firm's retail marketing strategy.
F
When a retailer donates money to charity, this is considered a personal objective
F
if a retailer has a financial leverage rate of 2.3 and an asset turnover of 2, then its RONW is 4.6 percent
F
"Are new firms entering or are existing firms leaving? What is the impact on us?" is an example of a "opportunity."
T
"Do competitors do a better job of selecting merchandise and anticipating demand?" is an example of a "weakness?"
T
A firm's specific goals and objectives should not be identified within its mission statement
T
A good mission statement states how the retailer intends to use its resources, how it expects to relate to the ever-changing environment, and how it expresses the values it intends to offer the consumer.
T
A retailer operating with a profit margin of 20 percent is making $20 on each $100 of sales.
T
A retailer's goals and objectives should give precision and direction to the retailer's mission statement.
T
A strategy is a carefully designed plan for achieving the retailer's goals and objectives
T
All retail objectives, of whatever type, must be consistent with and reinforce the retailer's overall mission
T
An equity objective reflects the retailer's desire to treat the consumer and suppliers fairly and not endanger their living conditions.
T
By assessing changing environmental forces, strategic planning opportunities can be found
T
Essentially, a retailer's mission statement describes the fundamental nature, rationale, and direction of the firm
T
Financial performance objectives analyze the retailer's ability to provide a profit level adequate to continue in business.
T
Good strategies that reduce operating costs while providing the appropriate level of service present significant opportunities for retailers.
T
If a retailer has a net profit margin of 2.0 percent and an asset turnover of 3.0, then its ROA will be 6.0 percent
T
If a retailer makes efficient use of available resources, then the retailer is said to be operations effective.
T
If the customer will never be profitable because of size, location, or other demands, then that customer must be dropped
T
Less than 60 percent of all retailers have a written mission statement
T
Market performance objectives compare a retailer's actions against those of competitors.
T
Market share is equal to the retailer's total sales divided by total market sales.
T
Net profit margin shows how much profit a retailer makes on each dollar of sales.
T
Operations management involves managing the buying and handling of merchandise, pricing, advertising and promotion, customer services, selling and facilities.
T
Paying taxes is the retailer's role in helping finance societal needs that the government deems appropriate, from welfare programs to national parks.
T
Personal objectives relate to how a retail owner wishes to help individuals employed by the firm fulfill some of their needs
T
Retailers typically can not control the environmental factors that may impact them
T
Self-gratification focuses on the needs and desires of the owners, managers, or employees of the firm and their pursuit of what they truly want out of life.
T
Strategies indicate how the retailer will attempt to accomplish its goals with the resources available.
T
Success for all retailers, large and small, is generally a matter of good planning and the implementation of the plan.
T
Superior planning can enable retailers to offset some of the advantages their competition may have, such as a better location.
T
Target market refers to the group of consumers that a retailer is seeking to serve
T
The retail mix is a combination of merchandise, price, advertising and promotion, location, customer service and selling, and store layout and design that best serves the segments targeted by the retailer.
T
The strategic profit model (SPM) assesses a retailer's performance and is based on the retailer's net profit margin, rate of asset turnover, financial leverage, and return on net worth.
T
Value proposition is the difference between the benefits offered by one retailer versus those of the competition.
T
