Question 1

The principal difference between accounting profit and economic profit is:

Accepted Answer

A) Accounting profit is distorted by the arbitrary treatment of depreciation and unusual items 
B) Accounting profit includes both economic profit and the normal return on capital to the providers of equity capital 
C) Economic profit is cash flow based and is, hence, less subject to manipulation that accounting profit 
D) Economic profit is endorsed by economists who tend to be more rigorous than accountants. 
A) Accounting profit is distorted by the arbitrary treatment of depreciation and unusual items 
B) Accounting profit includes both economic profit and the normal return on capital to the providers of equity capital 
C) Economic profit is cash flow based and is, hence, less subject to manipulation that accounting profit 
D) Economic profit is endorsed by economists who tend to be more rigorous than accountants.

Question 2

The main challenge of establishing the goal of the firm is that:

Accepted Answer

A) Flexibility of accounting rules allow different firms to measure profit in different ways 
B) Each firm has different set of stakeholders, hence will define stakeholder value differently 
C) Each enterprise has a distinct business purpose 
D) The goal of the firm is not directly observable 
A) Flexibility of accounting rules allow different firms to measure profit in different ways 
B) Each firm has different set of stakeholders, hence will define stakeholder value differently 
C) Each enterprise has a distinct business purpose 
D) The goal of the firm is not directly observable

Question 3

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 capital employed 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 capital employed 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).

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Consumer surplus is equal to :

Accepted Answer

A) The amount consumers pay for a product 
B) The difference between the amount consumers would be willing to pay for a product and what they actually pay 
C) The difference between the sales value of a firm's output and the direct costs of producing it 
D) The amount consumers pay for a product adjusted for the social costs and benefits of the product. 
A) The amount consumers pay for a product 
B) The difference between the amount consumers would be willing to pay for a product and what they actually pay 
C) The difference between the sales value of a firm's output and the direct costs of producing it 
D) The amount consumers pay for a product adjusted for the social costs and benefits of the product.

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 the above 
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 the above

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 vary 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 vary 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

A major difficulty in 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 9

"Value" refers to the estimated monetary worth of a product or asset.

Accepted Answer

A) True 
 B)False

Question 10

For a firm to survive over the long term it must:

Accepted Answer

A) Pay a satisfactory level of dividends to its shareholders 
B) Create customer loyalty, that can then be converted into profit through increasing prices 
C) Earn as rate of return that covers its cost of capital 
D) Balance the interests of all its stakeholders. 
A) Pay a satisfactory level of dividends to its shareholders 
B) Create customer loyalty, that can then be converted into profit through increasing prices 
C) Earn as rate of return that covers its cost of capital 
D) Balance the interests of all its stakeholders.

Question 11

In relation to the social responsibilities of firms, leading economists and management theorists:

Accepted Answer

A) Agree that CSR is an essential "moral imperative" 
B) Have fundamental disagreements about the justification for CSR 
C) Believe that the capitalist system would operate better if all firms adopted CSR 
D) Regard most firms' CSR initiatives as primarily exercises in public relations 
A) Agree that CSR is an essential "moral imperative" 
B) Have fundamental disagreements about the justification for CSR 
C) Believe that the capitalist system would operate better if all firms adopted CSR 
D) Regard most firms' CSR initiatives as primarily exercises in public relations

Question 12

Values and ethical principles can complement a firm's strategy through creating a sense of identity and supporting cohesion.

Accepted Answer

A) True 
 B)False

Question 13

The divergence between accounting profit and economic profit is likely to:

Accepted Answer

A) Greater for highly leveraged firms than for equity-financed firms 
B) Greater for labor-intensive firms than for capital-intensive firms 
C) Greater for capital-intensive firms than for labor-intensive firms 
D) Greater for technology-based firms than firms in mature industries 
A) Greater for highly leveraged firms than for equity-financed firms 
B) Greater for labor-intensive firms than for capital-intensive firms 
C) Greater for capital-intensive firms than for labor-intensive firms 
D) Greater for technology-based firms than firms in mature industries

Question 14

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

Accepted Answer

A) Benchmarks 
B) Trends in these ratios over the past 5 years or more 
C) Multiple indicators 
D) All of the above 
A) Benchmarks 
B) Trends in these ratios over the past 5 years or more 
C) Multiple indicators 
D) All of the above

Question 15

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

Accepted Answer

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

The principal difference between accounting profit and economic profit is:

The main challenge of establishing the goal of the firm is that:

In appraising a firm's profit performance:

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

Consumer surplus is equal to :

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:

A major difficulty in selecting performance targets for a firm is that performance goals tend to be long term, but effective monitoring must be short term.

"Value" refers to the estimated monetary worth of a product or asset.

For a firm to survive over the long term it must:

In relation to the social responsibilities of firms, leading economists and management theorists:

Values and ethical principles can complement a firm's strategy through creating a sense of identity and supporting cohesion.

The divergence between accounting profit and economic profit is likely to:

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

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

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

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

The principal difference between accounting profit and economic profit is:

The main challenge of establishing the goal of the firm is that:

In appraising a firm's profit performance:

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

Consumer surplus is equal to :

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:

A major difficulty in selecting performance targets for a firm is that performance goals tend to be long term, but effective monitoring must be short term.

"Value" refers to the estimated monetary worth of a product or asset.

For a firm to survive over the long term it must:

In relation to the social responsibilities of firms, leading economists and management theorists:

Values and ethical principles can complement a firm's strategy through creating a sense of identity and supporting cohesion.

The divergence between accounting profit and economic profit is likely to:

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

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

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

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