Chapter 5 LearnSmart

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 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. - Microsoft leveraged its computer operating system to sell other software programs.

When one wants to further explore the difference in return on revenue (ROR) for two competitors, one can look at which of the following ratios? (Check the three that apply.)

- COGS/revenue - R&D expense/revenue - SG&A expense/revenue

Which of the following industries use a subscription model? (Check all that apply.)

- Cellphone providers - Internet providers - Magazines

Achieving competitive advantage means maximizing the difference between which of the following? (Check the two that apply.)

- Consumers' willingness to pay - Cost to produce the good or service

The pay-as-you-go model is ______.

gaining momentum

When a firm does favorably compared to similar firms, it is said to ______.

outperform

When competitive advantage is assessed from an analysis of publicly available data, a firm measures its _____.

accounting profitability

The balanced scorecard approach helps managers balance ______ goals.

financial and strategic

Fixed costs are ______ consumer demand.

independent of

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 ______ model.

pay-as-you-go

To measure firm-level competitive advantage, a company must ______.

estimate the economic value created for all products and services offered by the firm

The balanced scorecard framework draws from which of the following?

from multiple internal and external performance metrics

For a product that has a large economic value, a firm can choose to charge the same price as competitors in order to ______.

gain market share

To understand how effectively a firm uses its capital, one can use the ratio ______.

net profits/invested capital

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

Under a wholesale model, RETAILERS (not the wholesalers) sell goods for ______.

any price they want

In general, a firm generates ______ when its cost of capital is lower than its ROIC.

value

In a subscription-based business model, customers pay for ______.

access to a product or service

Which of the following dimensions make up the triple bottom line? (Check all that apply.)

- economic - ecological - social

Which statements about creating and implementing an effective business model are true?

- 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.

Which of the following are the key questions for understanding the balanced scorecard? (Check all that apply.)

- How do we create value? - How do shareholders view us? - How do customers view us? - What core competencies do we need?

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

To determine how efficiently a company can produce a good, managers look to the ______.

COGS/revenue ratio

True or false: Stock market valuations are often unreliable due to market fluctuations and are therefore not used to assess competitive advantage.

False

True or false: The best measure of competitive advantage can be found in the performance of specific departments.

False

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?

Firm B

Premium services cost money with complementary basic services, is a description of which type of business model?

Freemium

Which of the following is true about shareholders of a public company?

They can be individuals or organizations.

True or false: The freemium business model can be considered an evolutionary variation on the razor--razor-blade model.

True

With a(n) ______, firms describe how they turn strategy into action.

business model

When a firm goes bankrupt, shareholders ______.

cannot recover their risk capital

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 ______ rate, or the proportion of subscribers who leave, down.

churn

Public companies are required by law to release detailed accounting data, which enables ______.

comparative analysis of firms

When implementing the razor-razorblade strategy, companies make their profit from ______.

complementary goods

If Tom would have paid $1,000 for a new laptop but was able to purchase one for $800, the $200 he saved is considered his ______.

consumer surplus

The firm's accounting profitability, ability to create shareholder value, and ability to generate economic value tend to be ______.

correlated

Compared to the past, the importance of firms' intangibles has increased. Therefore the importance of a firm's book value has _____ as part of the firm's total stock market valuation.

decreased

Economic value created is the ______ the cost to produce a product/service and the amount the buyer is willing to pay for it.

difference between

As a consequence of the rapid development of business models, ______ may breach existing rules of commerce.

producers

If a firm has a successful ______ 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

When a company offers video-game consoles at a steep discount, but charges customers high fees for games, they are operating on a ______ business model.

razor—razor-blade

The subjectively determined maximum amount a customer would pay for a product is its ______ price.

reservation

From the view of a shareholder, the measure of competitive advantage that matters most is return on _____.

risk capital

In order to determine market capitalization, one multiplies which of the following together? (Check all that apply.)

share price x number of outstanding shares

The legal owners of publicly traded companies are called ______.

shareholders

When a trade occurs, the consumer and producer both capture ______.

some of the economic value

Which of the following are true of a firm's book value? (Check all that apply.)

- It captures the historical cost of a firm's assets. - It is calculated as costs of assets minus accumulated depreciation. - Its importance has declined over time.

Which of the following statements are true concerning a firm's business model? (Check all that apply.)

- It indicates the way the firm works with buyers and suppliers. - It essentially explains how the firm intends to make money. - It details the firm's competitive tactics and initiatives.

A company's total return to shareholders consists of which of the following? (Check all that apply.)

- Stock price appreciation - Dividends received

Answering the balanced scorecard question of "how do we create value?" challenges managers to develop strategic objectives that ensure future ______. (Check all that apply.)

- competitiveness - innovation - organizational learning

Which of the following would be labeled variable costs by a computer manufacturer? (Check all that apply.)

- display screens - hard drives

Which of the following statements is best illustrated by the decades-long business rivalry between the technology giants Apple and Microsoft?

A firm's competitive advantage is transitory.

The difference between the cost of producing a product and the price consumers are willing to pay for that product is known as ______.

economic value created

To determine the value of a good in the eyes of consumers, a firm can ______.

examine consumers' purchasing habits for their revealed preferences

Everybody can use the basic version of Dropbox for free, but needs to pay for premium services. Dropbox operates on a ______ business model.

freemium

Which of the following would provide the best benchmark of a computer firm's performance relative to other high-tech firms?

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 ______.

the balanced scorecard

Economic value creation is calculated as ______.

the sum of consumer and producer surplus

The most a consumer is willing to pay for a product is equivalent to the product's ______.

total perceived consumer benefits

Because external factors create volatility in stock prices, a better measure of a firm's performance over the long term is the ______.

total return to shareholders

Investors in a company are mostly concerned about the company's ______.

total return to shareholders

Wholesaling is considered a(n) ______ business model.

traditional

Which of the following makes it more likely that producers will breach existing rules of commerce when responding to rapid developments in business models?

when the business models are disruptive

Which of the following are considered disadvantages of the shareholder value creation approach? (Check all that apply.)

- Stock prices are influenced by the psychological mood of investors. - Stock prices can be highly volatile. - Overall macroeconomic factors have a direct bearing on stock prices.

To determine a product's producer surplus, which of the following must be compared? (Check all that apply.)

- Total cost of production - Price charged

Which statements about stock market valuations are true?

- 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.

Which of the following are standard performance dimensions for a company? (Check all that apply.)

- a firm's accounting profitability - how much shareholder value a firm creates - how much economic value a firm generates

Which of the following are elements of the social dimension of the triple bottom line? (Check all that apply.)

- human sustainability - achieving work/life balance

Which of the following are considered off-balance sheet items? (Check all that apply.)

- pension obligations - operating leases

Which of the following performance dimensions matter in judging the effectiveness of a firm's strategy? (Check all that apply.)

- qualitative - quantitative

Which of the following are among the most commonly used metrics for comparing the performance of different companies? (Check all that apply.)

- return on equity - return on revenue - return on assets

Managers implement the blueprint of their business model through which of the following? (Check all that apply.)

- structures - culture - processes

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? (Check all that apply.)

- subscription - razor--razor-blade