MGT Exam 2 CH 5 only
The working capital turnover of Tesva Systems Corp. is 6.0. What does this financial data suggest?
For every dollar Tesva Systems puts to work, the company realizes $6.00 of sales.
When using the balanced scorecard approach to assess a firm's performance, which of the following is NOT a key question that managers need to answer?
How do we reduce the economic value created?
Which of the following is an advantage of applying the economic value creation perspective to assess a firm's performance?
In economic value perspective, analysts not only consider historical costs, but also opportunity costs
The market capitalization of a public company is $5 billion. Each share of the company is traded at $200. What do you infer from this financial data?
The firm's number of outstanding shares is 25 million.
The working capital of a small home-based business is $200,000. The revenues generated account to $600,000, and the profits incurred are $300,000. What would be the company's working capital turnover?
3, that is, $600,000/$200,000
________ denotes the dollar amount a consumer would attach to a good or service.
Value
Which of the following statements is true of accounting data?
Accounting data are historical data and thus backward-looking.
The payable turnover for Apple and BlackBerry (as of fiscal year 2012) was 7.4 and 24.8 respectively. From this data we can conclude that:
Apple has been more efficient than Blackberry in paying creditors and generating interest-free loans from suppliers
How does a firm capture its producer surplus for a good or service?
As profit per unit sold
The receivables turnover of GD Products Inc. is 13.6 and that of its competitor, AP Goods Inc., is 6.0. What does this financial data primarily imply?
GD Products collects accounts receivables faster than what AP Goods does.
Which of the following ratios best expresses inventory turnover?
Cost of goods sold/Inventory
Which of the following competitively important assets is typically excluded from a firm's balance sheet?
Customer experience
________ is best described as the difference between a buyer's willingness to pay for a product or service and a firm's total cost to produce it.
Economic value created
The fixed asset turnover of a company is 8.3. What do you infer from this?
Every dollar spent on the company's fixed assets generates $8.30 of revenue.
________ most precisely measures how well a company leverages its fixed assets, particularly property, plant, and equipment (PPE).
Fixed asset turnover
________ are best described as the value of the best forgone alternative use of the resources employed.
Opportunity costs
________ are the legal owners of public companies
Shareholders
________ is best described as a measure of how effectively capital is being used by a firm to generate revenue.
Working capital turnover
Unlike the financial ratios based on accounting data, total return to shareholders is:
an external performance metric
The translation of strategy into action primarily takes place in a firm's ________.
business model
In an economic context, strategy for producers is primarily about:
capturing the economic value created as much as possible
Economic value creation is best expressed as ________.
consumer surplus plus firm profit
The value a consumer attaches to a product or service is captured in the:
consumer's maximum willingness to pay for it
In the fiscal year 2012, BlackBerry's Cost of goods sold (COGS)/Revenue ratio was higher than that of its competitor, Apple. This implies that BlackBerry needs to work toward:
driving down its costs
In order to achieve a competitive advantage, a firm should be able to:
increase the difference between the value created and the cost to produce it.
Andrew invested $200,000 in the shares of a company. At the end of a year, he had earned $7,000 as dividends on his shares along with a $1,000 appreciation in the overall value of his shares. However, if Andrew had invested the same amount on an asset, like gold, the appreciation in its value would have earned him $10,000 at the end of the year. In this scenario, which of the following is Andrew's opportunity cost?
$10,000
A firm incurs $100 to manufacture an office table. It fixes the market price of the table as $250, and discounts the price to $200. However, the maximum a person is willing to pay for it is $180. What is the amount of total perceived consumer benefits in this scenario?
$180
Gina paid $900 for a camera that she thought was worth $1100 for all the features included in it. For the consumer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario?
$200
A firm has 30 million shares outstanding, and each share is traded at $100. Also, each shareholder gets a dividend of $2000 annually. In this case, the market capitalization is ________.
$3 billion, that is, 30 million shares × $100
Osion Electronics Inc. incurs a cost of $350 to produce one unit of a cell phone. The company's management has priced the product at $600 in the market. Considering the technological advancement of the cell phone, customers perceive its value to be around $800. What is the economic value created in this scenario?
$450
Which of the following is an advantage of the balanced scorecard?
It allows managers to translate a firm's vision into measureable operational goals.
Which of the following statements is true of the balanced scorecard?
It attempts to provide a holistic perspective on firm performance
Which of the following is NOT an advantage of the balanced scorecard approach to assess firm performance?
It is a tool which can be effectively used by managers for both strategic implementation and strategic formulation
Which of the following expressions accurately describes market cap?
It is the product of the number of outstanding shares and the share price.
Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization?
Market volatility makes it difficult to assess firm performance through these measures, particularly in the short term.
Which of the following equations best expresses return on revenue?
Net profits/Revenue
________ indicates how much a firm benefits from interest-free loans extended by its suppliers and creditors.
Payables turnover
________ indicates how fast a firm is collecting the credit amount extended by a firm to its customers.
Receivables turnover
________ precisely indicates how much of a firm's sales is converted into profits
Return on revenue
Which of the following best expresses fixed asset turnover?
Revenue/Fixed assets
Which of the following is NOT true of risk capital?
Risk capital invested in a firm can be legally recovered if the firm goes bankrupt
Which of the following is NOT an accurate expression of the economic value created per unit of a product sold?
The difference between the price charged and the firm's cost
Which of the following is NOT a limitation of the economic value creation framework?
The framework fails to provide the foundation that will help firms decide between cost-leadership or differentiation strategies.
Which of the following approaches to assess competitive advantage is based on the view that noneconomic factors can have a significant impact on a firm's financial performance?
The triple-bottom-line approach
After trying on a dress, a consumer assesses it to be worth a maximum of $100 and is willing to pay that amount for the dress. However, the dress was priced at $80. What is the amount, $100, referred to as?
The value (V) the consumer attaches to the dress
Which of the following statements is true of the triple bottom line?
Three dimensions, economic, social, and ecological, make up the triple bottom line.
Which of the following is an external performance metric?
Total return to shareholders
True Machine Inc. and One Electrona Inc. are two competing consumer electronics companies. While True Machine's COGS/Revenue is 66%, One Electrona's is 74%. What do you infer from this financial data?
True Machine's profit margin is higher than that of One Electrona.
Both Vibrant Phones Inc. and Oryxo Inc. incur a cost of $200 to manufacture a single unit of a cell phone. However, Vibrant Phones creates more economic value than what Oryxo does. What does this imply?
Vibrant Phones sells its products at a better price than Oryxo
A firm incurs $400 to manufacture a television. In the market, customers are willing to pay a maximum of $600 for the television priced at $500. The difference of $200 ($600 minus $400) is the ________.
economic value created
By selling a laptop at $1000 for which consumers are willing to pay up to $1200, a consumer electronics firm makes a profit of $400 per unit. In this scenario, the amount $600, that is ($1200 - $1000) + $400, is the ________.
economic value created
Competitive advantage goes to the firm that achieves the:
largest economic value created.
Samantha is a recent fashion graduate. She started her own apparel store with an investment of $300,000. In the first year she made a profit of $60,000. If she had taken up a job as a fashion editor for a magazine, she would have earned $50,000 as salary per year. Also, she could have invested her capital, $300,000, in treasury bonds and earned an interest of $12,000. Thus, the amount $62,000 ($50,000 + $12,000) would be Samantha's ________.
opportunity cost
When GD Inc. declared a dividend of $20,000,000, its market value increased from $8 billion to $8.5 billion. However, it lost a chance to reinvest $20,000,000 in the research and development of a new product which would have earned a profit of $200 million. Thus, this $200 million is referred to as GD Inc.'s ________.
opportunity cost
The difference between the price charged for a product and the cost to manufacture it is referred to as the ________.
producer surplus
From an investors' or shareholders' perspective, the measure of competitive advantage that matters most is the ________.
return on risk capital
Return on risk capital primarily includes:
stock price appreciation plus dividends received over a specific period
A high percentage of R&D/Revenue ratio indicates a(n):
strong focus on innovation to improve current products and services
The top management at BioTrue Pharma Inc. through rigorous testing ensures that the company develops and sells drugs that are free of harmful side-effects. Also, the company ensures that the chemical waste generated in the manufacturing process is kept to a bare minimum and is disposed of according to the regulations of the Environmental Protection Agency. The management assesses its overall performance based on these dimensions. Thus, the managers at Bio True Pharma are applying the ________ approach to measure firm performance.
triple bottom line
Using the ________ approach, managers audit their company's fulfillment of its social and ecological obligations to stakeholders such as employees, customers, suppliers, and communities as conscientiously as they track its financial performance
triple-bottom-line