Exam 2: Goals,values and Performance

In using accounting ratios to appraise a firm's performance,it is helpful to use:

The value of a real option can be calculated using:

Estimating a firm's future cash flows is a fairly straightforward task.

Michael Porter and Mark Kramer's concept of shared value is based upon the notion that business enterprises should focus,first,on creating value and,second,on distributing that value among different participants (including shareholders and society-at-large).

The two main categories of real options are growth options and flexibility options.Which of the following investments is not a growth option?

The biggest problem in designing a performance management system arises as a result of:

Since the long term is a series of short terms,short term profit maximization will always lead to long term profit maximization.

Although firms may pursue a variety of goals,the assumption that primary goal of strategy is to maximize profits over the long term may be justified by:

Disaggregating return on capital employed into sales margin and capital turnover offers a useful stating point for diagnosing firm performance.

For a firm to pursue stakeholder interests rather than shareholder interests requires that it maximizes value for all stakeholders rather than maximizes value for shareholders alone.The tools of stakeholder analysis mean that this is not a major problem for management.

To assess the profitability of a company it is usually better to use profitability ratios based upon balance sheet items (such as return on equity or return on capital employed)than portability ratios based upon sales (such as operating margin or net margin).

Maximizing enterprise value and maximizing shareholder value are closely linked because:

One implication of real option analysis is that when pursuing a new strategic initiative,there is value in a firm making an irreversible commitment to continuing that initiative.

Stock market capitalization offers the best available indicator of the net present value of a firm's future free cash flows.

In new product development,a "phases and gates" approach means that:

Value added can be defined as:

In practice,pursuing stakeholder interests and pursuing shareholder interests are identical since in order to make profits a firm must satisfy all its stakeholders.

For the purposes of strategy analysis,it is convenient to view business strategy is primarily a quest for:

The firms create value through production-transforming less valuable inputs into more valuable outputs-and also through:

Economic profit is a better indicator of a firm's performance than accounting profit because economic profit takes into account the normal expected return to capital.