Exam 2: Goals, Values, and Performance

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 divergence between accounting profit and economic profit is likely to:

In appraising a firm's profit performance:

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

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

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

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.

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

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

To assess the adequacy of the return on capital employed (ROCE)that a firm earned in its most recent financial year,which of the following would not be an appropriate benchmark:

A major problem encountered by firms that adopt the goal of maximizing shareholder value is the tendency to concentrate on increasing short-term profits at the expense of long-term profits.

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

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

According to Milton Friedman,the social purpose of a business is to make profit.

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

The total value created by a firm is equal to:

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