Question 1

In appraising a firm's profit performance:

Accepted Answer

A) Return on sales is a better indicator than return on invested capital. 
B) Return on invested capital is a better indicator than return on sales. 
C) Net margin is a better indicator than operating margin. 
D) Narrow measures of profit (such as after-tax net income)are better indicators than broad-based measures (such as EBITDA-earnings before interest,tax,depreciation and amortization). 
A) Return on sales is a better indicator than return on invested capital. 
B) Return on invested capital is a better indicator than return on sales. 
C) Net margin is a better indicator than operating margin. 
D) Narrow measures of profit (such as after-tax net income)are better indicators than broad-based measures (such as EBITDA-earnings before interest,tax,depreciation and amortization). B

Question 2

Real options are an important tool for thinking about strategic decisions under uncertainty,however,quantitative techniques designed to value financial options (e.g.the Black-Scholes option pricing model)cannot be applied to real options.

Accepted Answer

A) True 
 B)False  False

Question 3

For a value for the firm requires that a firm:

Accepted Answer

A) Earns profits for shareholders,then uses these profits to satisfy the interests of other stakeholders. 
B) Creates customer loyalty,that can then be converted into profit through increasing prices. 
C) Creates value for customers,then appropriate some of that value as profit. 
D) Creates value for employees through attractive pay,benefits,and working conditions,then relying upon employees to drive customer satisfaction and,eventually,profits. 
A) Earns profits for shareholders,then uses these profits to satisfy the interests of other stakeholders. 
B) Creates customer loyalty,that can then be converted into profit through increasing prices. 
C) Creates value for customers,then appropriate some of that value as profit. 
D) Creates value for employees through attractive pay,benefits,and working conditions,then relying upon employees to drive customer satisfaction and,eventually,profits. C

Question 4

Michael Porter and Mark Kramer's notion of "shared value" reconceptualises CSR (corporate social responsibility)by emphasizing:

Accepted Answer

A) CSR as a value creating activity. 
B) CSR as a source of legitimacy for a company. 
C) CSR a means of transferring value from shareholders to less fortunate members of society. 
D) CSR as a counterweight to greed and amorality among managers and investors. 
A) CSR as a value creating activity. 
B) CSR as a source of legitimacy for a company. 
C) CSR a means of transferring value from shareholders to less fortunate members of society. 
D) CSR as a counterweight to greed and amorality among managers and investors.

Question 5

The main difference between accounting measures of firm performance and stock-market measures of firm performance is:

Accepted Answer

A) Accounting measures are less reliable because of firms' discretion over how they apply accounting conventions 
B) Stock market measures are less reliable because share prices are so volatile 
C) Accounting data offers a sound basis for forecasting future performance 
D) Accounting measures are backward looking; stock market measures are forward looking 
A) Accounting measures are less reliable because of firms' discretion over how they apply accounting conventions 
B) Stock market measures are less reliable because share prices are so volatile 
C) Accounting data offers a sound basis for forecasting future performance 
D) Accounting measures are backward looking; stock market measures are forward looking

Question 6

Viewing strategy as a portfolio of options rather than a portfolio of investments relies upon the rationale that:

Accepted Answer

A) Uncertainty means that flexibility is valuable 
B) Committing to a long-term program of investment can be disastrous if circumstances change 
C) Most investment projects can be divided into a sequence of stages where,at any point of time,it is only necessary to decide the next stage 
D) All of these 
A) Uncertainty means that flexibility is valuable 
B) Committing to a long-term program of investment can be disastrous if circumstances change 
C) Most investment projects can be divided into a sequence of stages where,at any point of time,it is only necessary to decide the next stage 
D) All of these

Question 7

To assess whether or not a firm is earning an adequate rate of profit,return on capital employed (ROCE)is a better indicator than return on sales because:

Accepted Answer

A) Sales are more variable than capital employed 
B) Return on sales varies between industries according to their capital intensity 
C) A firm's return on sales depends upon the choice between gross margin,operating margin,and net margin 
D) ROCE is based upon cash flow 
A) Sales are more variable than capital employed 
B) Return on sales varies between industries according to their capital intensity 
C) A firm's return on sales depends upon the choice between gross margin,operating margin,and net margin 
D) ROCE is based upon cash flow

Question 8

Because profit is defined by accounting rules and measured in financial statements,profit maximization is an unambiguous performance goal for a firm.

Accepted Answer

A) True 
 B)False

Question 9

The balanced scorecard is primarily a tool for implementing the stakeholder view of the firm.

Accepted Answer

A) True 
 B)False

Question 10

The main difficulty of selecting performance targets for a firm is that performance goals tend to be long term,but effective monitoring must be short term.

Accepted Answer

A) True 
 B)False

Question 11

A major impediment to the stakeholder view of the firm is:

Accepted Answer

A) The inevitable conflicts between the interests of different stakeholders 
B) The fact that customers and employees are likely to be even more short-term oriented than shareholders 
C) The difficulties of quantifying the performance of the stakeholder-focused firm 
D) The difficulty of constituting a board of directors that represents the interests of all stakeholders 
A) The inevitable conflicts between the interests of different stakeholders 
B) The fact that customers and employees are likely to be even more short-term oriented than shareholders 
C) The difficulties of quantifying the performance of the stakeholder-focused firm 
D) The difficulty of constituting a board of directors that represents the interests of all stakeholders

Question 12

Profit and value of the firm are two concepts which are:

Accepted Answer

A) Unrelated because cash flow not profit is the main determinant of firm value 
B) Closely linked because the present value of a firm's future profits approximates to the market value of its securities 
C) Closely linked because dividends are paid out of profits and it is dividends that determine the market value of a firm's shares 
D) Closely linked because the market value of a firm is determined by its profits multiplied by the price-earnings ratio of its shares 
A) Unrelated because cash flow not profit is the main determinant of firm value 
B) Closely linked because the present value of a firm's future profits approximates to the market value of its securities 
C) Closely linked because dividends are paid out of profits and it is dividends that determine the market value of a firm's shares 
D) Closely linked because the market value of a firm is determined by its profits multiplied by the price-earnings ratio of its shares

Question 13

To diagnose the sources of a firm's poor financial performance,it is useful to:

Accepted Answer

A) Focus on the firm's cash flow statement rather than its income statement and balance sheet 
B) Concentrate on sales growth and market share rather than profit data 
C) Adopt a forward-looking approach through analyzing share price performance rather than looking at backward-looking accounting statements 
D) Disaggregate overall return on capital into its component items 
A) Focus on the firm's cash flow statement rather than its income statement and balance sheet 
B) Concentrate on sales growth and market share rather than profit data 
C) Adopt a forward-looking approach through analyzing share price performance rather than looking at backward-looking accounting statements 
D) Disaggregate overall return on capital into its component items

Question 14

Which of the following activities by Starbucks Inc.is least likely to be an example of Michael Porter and Mark Kramer's "shared value creation"?

Accepted Answer

A) The 2015 "Race Together" initiative to combat racism and promote racial harmony 
B) The introduction in 2014 of college tuition benefits to employees 
C) Participating in the Coffee and Farm Equity program to benefit growers 
D) Financial and media support for American Red Cross efforts to aid refugees 
A) The 2015 "Race Together" initiative to combat racism and promote racial harmony 
B) The introduction in 2014 of college tuition benefits to employees 
C) Participating in the Coffee and Farm Equity program to benefit growers 
D) Financial and media support for American Red Cross efforts to aid refugees

Question 15

If a firm is to achieve superior profit performance,it is essential that profitability targets are set for managers.If managers focus on the drivers of profitability rather than profitability itself,their efforts will be diffused.

Accepted Answer

A) True 
 B)False

Question 16

The entrepreneurs who create business enterprises are motivated primarily by the desire for personal wealth.

Accepted Answer

A) True 
 B)False

Question 17

Every business enterprise has a distinct purpose; however,common to all businesses is the goal of:

Accepted Answer

A) Making customers satisfied. 
B) Creating value. 
C) Satisfying stakeholders. 
D) Maximizing shareholder value. 
A) Making customers satisfied. 
B) Creating value. 
C) Satisfying stakeholders. 
D) Maximizing shareholder value.

Question 18

A firm's Value Added is the difference between the value of its outputs and the costs of the inputs purchased by the firm to provide these outputs.

Accepted Answer

A) True 
 B)False

Question 19

Basing management decisions on economic profit (e.g.Economic Value Added)rather than accounting profit is more important for companies with few fixed assets (such as software companies and consulting firms)than capital-intensive companies such as chemical companies and vehicle manufacturers.

Accepted Answer

A) True 
 B)False

Question 20

A "phases and gates" approach to new product development is an example of a business process designed to create option value.

Accepted Answer

A) True 
 B)False

In appraising a firm's profit performance:

Real options are an important tool for thinking about strategic decisions under uncertainty,however,quantitative techniques designed to value financial options (e.g.the Black-Scholes option pricing model)cannot be applied to real options.

For a value for the firm requires that a firm:

Michael Porter and Mark Kramer's notion of "shared value" reconceptualises CSR (corporate social responsibility)by emphasizing:

The main difference between accounting measures of firm performance and stock-market measures of firm performance is:

Viewing strategy as a portfolio of options rather than a portfolio of investments relies upon the rationale that:

To assess whether or not a firm is earning an adequate rate of profit,return on capital employed (ROCE)is a better indicator than return on sales because:

Because profit is defined by accounting rules and measured in financial statements,profit maximization is an unambiguous performance goal for a firm.

The balanced scorecard is primarily a tool for implementing the stakeholder view of the firm.

The main difficulty of selecting performance targets for a firm is that performance goals tend to be long term,but effective monitoring must be short term.

A major impediment to the stakeholder view of the firm is:

Profit and value of the firm are two concepts which are:

To diagnose the sources of a firm's poor financial performance,it is useful to:

Which of the following activities by Starbucks Inc.is least likely to be an example of Michael Porter and Mark Kramer's "shared value creation"?

If a firm is to achieve superior profit performance,it is essential that profitability targets are set for managers.If managers focus on the drivers of profitability rather than profitability itself,their efforts will be diffused.

The entrepreneurs who create business enterprises are motivated primarily by the desire for personal wealth.

Every business enterprise has a distinct purpose; however,common to all businesses is the goal of:

A firm's Value Added is the difference between the value of its outputs and the costs of the inputs purchased by the firm to provide these outputs.

Basing management decisions on economic profit (e.g.Economic Value Added)rather than accounting profit is more important for companies with few fixed assets (such as software companies and consulting firms)than capital-intensive companies such as chemical companies and vehicle manufacturers.

A "phases and gates" approach to new product development is an example of a business process designed to create option value.

The Concept of Strategy

Industry Analysis: the Fundamentals

Further Topics in Industry and Competitive Analysis

Analyzing Resources and Capabilities

Organization Structure and Management Systems: the Fundamentals of Strategy Implementation

The Sources and Dimensions of Competitive Advantage

Industry Evolution and Strategic Change

Technology-Based Industries and the Management of Innovation

Competitive Advantage in Mature Industries

Vertical Integration and the Scope of the Firm

Global Strategy and the Multinational Corporation

Diversification Strategy

Implementing Corporate Strategy: Managing the Multibusiness Firm

External Growth Strategies: Mergers,acquisitions,and Alliances

Current Trends in Strategic Management

Filters

Exam 2: Goals,values and Performance

In appraising a firm's profit performance:

Real options are an important tool for thinking about strategic decisions under uncertainty,however,quantitative techniques designed to value financial options (e.g.the Black-Scholes option pricing model)cannot be applied to real options.

For a value for the firm requires that a firm:

Michael Porter and Mark Kramer's notion of "shared value" reconceptualises CSR (corporate social responsibility)by emphasizing:

The main difference between accounting measures of firm performance and stock-market measures of firm performance is:

Viewing strategy as a portfolio of options rather than a portfolio of investments relies upon the rationale that:

To assess whether or not a firm is earning an adequate rate of profit,return on capital employed (ROCE)is a better indicator than return on sales because:

Because profit is defined by accounting rules and measured in financial statements,profit maximization is an unambiguous performance goal for a firm.

The balanced scorecard is primarily a tool for implementing the stakeholder view of the firm.

The main difficulty of selecting performance targets for a firm is that performance goals tend to be long term,but effective monitoring must be short term.

A major impediment to the stakeholder view of the firm is:

Profit and value of the firm are two concepts which are:

To diagnose the sources of a firm's poor financial performance,it is useful to:

Which of the following activities by Starbucks Inc.is least likely to be an example of Michael Porter and Mark Kramer's "shared value creation"?

If a firm is to achieve superior profit performance,it is essential that profitability targets are set for managers.If managers focus on the drivers of profitability rather than profitability itself,their efforts will be diffused.

The entrepreneurs who create business enterprises are motivated primarily by the desire for personal wealth.

Every business enterprise has a distinct purpose; however,common to all businesses is the goal of:

A firm's Value Added is the difference between the value of its outputs and the costs of the inputs purchased by the firm to provide these outputs.

Basing management decisions on economic profit (e.g.Economic Value Added)rather than accounting profit is more important for companies with few fixed assets (such as software companies and consulting firms)than capital-intensive companies such as chemical companies and vehicle manufacturers.

A "phases and gates" approach to new product development is an example of a business process designed to create option value.

The Concept of Strategy

Industry Analysis: the Fundamentals

Further Topics in Industry and Competitive Analysis

Analyzing Resources and Capabilities

Organization Structure and Management Systems: the Fundamentals of Strategy Implementation

The Sources and Dimensions of Competitive Advantage

Industry Evolution and Strategic Change

Technology-Based Industries and the Management of Innovation

Competitive Advantage in Mature Industries

Vertical Integration and the Scope of the Firm

Global Strategy and the Multinational Corporation

Diversification Strategy

Implementing Corporate Strategy: Managing the Multibusiness Firm

External Growth Strategies: Mergers,acquisitions,and Alliances

Current Trends in Strategic Management

Filters