Question 1

Which of the following is not a limitation of the economic value creation framework?

Accepted Answer

A)   The framework falls short when managers are called upon to operationalize competitive advantage.
B)   The framework is not as effective as accounting profitability or shareholder value creation when the need for "hard numbers" arises.
C)   The framework fails to provide the foundation that will help firms decide between cost-leadership or differentiation strategies.
D)   The framework cannot be effectively applied for assessing corporate-level performance of diversified conglomerates.E) A) and C)
F) B) and C)

Question 2

In 2014,Apple turned over its inventory more than 53 times.In stark contrast,Microsoft turned over its inventory only about 10 times during the year.Which of the following best explains this difference?

Accepted Answer

A)   Apple had a more effective management of its global supply chain than Microsoft.
B)   Microsoft had a stronger demand for its tablet computer than Apple did for its tablet computer.
C)   Apple operated its own production facilities and therefore had lower production costs than Microsoft.
D)   Microsoft had production facilities in countries with lower production costs than Apple.E) A) and C)
F) A) and B)

Question 3

The fixed asset turnover of a company is 8.3.What do you infer from this?

Accepted Answer

A)   Every dollar spent on the company's fixed assets generates $8.30 of revenue.
B)   8.3% of the company's revenue is invested in fixed assets.
C)   The return on fixed assets will break even in 8.3 years.
D)   The cost of capital invested on fixed assets is 8.3% of the total profit.E) B) and C)
F) A) and D)

Question 4

In order to achieve a competitive advantage,a firm should be able to

Accepted Answer

A)   increase its payable turnover.
B)   keep its producer surplus low.
C)   increase the difference between the value created and the cost to produce it.
D)   increase the difference between consumer surplus and its profits.E) C) and D)
F) B) and C)

Question 5

The balanced-scorecard can accommodate

Accepted Answer

A)   only short-term performance metrics.
B)   only long-term performance metrics.
C)   both short- and long-term performance metrics.
D)   neither short- or long-term performance metrics.E) A) and D)
F) C) and D)

Question 6

The three financial ratios that constitute return on revenue are Cost of goods sold/Revenue,Research & Development expense/Revenue,and

Accepted Answer

A)   Accounting profitability/Revenue.
B)   Economic value created/Revenue.
C)   Total return to shareholders/Revenue.
D)   Selling, general, & administrative expense/Revenue.E) A) and B)
F) A) and C)

Question 7

Which of the following best expresses fixed asset turnover?

Accepted Answer

A)   Current assets/Fixed assets
B)   Revenue/Fixed assets
C)   Fixed assets/Total return to shareholders
D)   Fixed assets/Current liabilitiesE) A) and B)
F) All of the above

Question 8

Return on risk capital primarily includes

Accepted Answer

A)   stock price appreciation plus dividends received over a specific period.
B)   consumer surplus plus firm profit.
C)   account receivables plus account payables.
D)   economic value created by a firm plus reservation price.E) All of the above
F) B) and C)

Question 9

In an economic context,strategy for producers is primarily about

Accepted Answer

A)   distributing the economic value created equally between consumers and themselves.
B)   reducing the difference between consumer's willingness to pay for a product and the cost to produce it.
C)   capturing the economic value created as much as possible.
D)   lowering producer surplus and increasing consumer surplus.E) None of the above
F) B) and C)

Question 10

Which of the following frameworks used to measure competitive advantage relies on both an internal and an external view of a firm?

Accepted Answer

A)   the economic value creation model
B)   the accounting profitability model
C)   the shareholder value creation model
D)   the balanced-scorecard modelE) A) and C)
F) All of the above

Question 11

_____ of receivables turnover imply more efficient management in collecting accounts receivable and shorter durations of interest-free loans to customers.

Accepted Answer

A)   Unsteady ratios
B)   Steady ratios
C)   Higher ratios
D)   Lower ratiosE) A) and B)
F) All of the above C

Question 12

_____ indicates how much a firm benefits from interest-free loans extended by its suppliers and creditors.

Accepted Answer

A)   Payables turnover
B)   Receivables turnover
C)   Assets turnover
D)   Inventory turnoverE) A) and D)
F) B) and C)

Question 13

During the process of formulating an effective business model,a firm's managers should first

Accepted Answer

A)   transform their strategy of how to compete into a blueprint of actions and initiatives.
B)   implement their strategy at corporate, strategic business unit, and functional levels.
C)   implement their blueprint of actions and initiatives through structures, processes, culture, and procedures.
D)   evaluate the firm's strategy already in effect and take corrective actions if necessary.E) A) and B)
F) A) and C)

Question 14

_____ denotes the dollar amount a consumer would attach to a good or service.

Accepted Answer

A)   Utility
B)   Value
C)   Consumer surplus
D)   Economic contributionE) C) and D)
F) B) and C)

Question 15

_____ are best described as the value of the best forgone alternative use of the resources employed.

Accepted Answer

A)   Variable costs
B)   Opportunity costs
C)   Social costs
D)   Switching costsE) All of the above
F) A) and C) B

Question 16

Which of the following statements is not true of competitive advantage?

Accepted Answer

A)   Competitive advantage is reflected in superior firm performance.
B)   Competitive advantage is a multifaceted concept.
C)   Competitive advantage is an absolute measure.
D)   Competitive advantage has been linked to a firm's triple-bottom-line.E) A) and B)
F) B) and D)

Question 17

Which of the following is not an advantage of the balanced-scorecard approach to assess firm performance?

Accepted Answer

A)   It allows managers to communicate and link the strategic vision to responsible parties within an organization.
B)   It helps managers to implement feedback and organizational learning in order to modify and adapt strategic goals when indicated.
C)   It provides a concise report that tracks chosen metrics and measures and compares them to target values.
D)   It is a tool which can be effectively used by managers for both strategic implementation and strategic formulation.E) C) and D)
F) B) and D)

Question 18

The cost of capital to create a product is a fixed cost because it is

Accepted Answer

A)   directly proportional to the output level.
B)   uniform throughout all firms and industries.
C)   not a part of the profit calculations.
D)   unaffected by consumer demand.E) C) and D)
F) B) and D)

Question 19

Competitive advantage goes to the firm that achieves the

Accepted Answer

A)   largest economic value created.
B)   lowest producer surplus.
C)   highest payable turnover.
D)   highest Cost of goods sold/Revenue ratio.E) B) and C)
F) All of the above

Question 20

_____ precisely indicates how much of a firm's sales is converted into profits.

Accepted Answer

A)   Break-even price
B)   Working capital turnover
C)   Return on revenue
D)   Inventory turnoverE) B) and D)
F) None of the above C

Exam 5: Competitive Advantage, Firm Performance, and Business Models

Which of the following is not a limitation of the economic value creation framework?

Correct AnswerverifiedShow Answer

In 2014,Apple turned over its inventory more than 53 times.In stark contrast,Microsoft turned over its inventory only about 10 times during the year.Which of the following best explains this difference?

Correct AnswerverifiedShow Answer

The fixed asset turnover of a company is 8.3.What do you infer from this?

Correct AnswerverifiedShow Answer

In order to achieve a competitive advantage,a firm should be able to

Correct AnswerverifiedShow Answer

The balanced-scorecard can accommodate

Correct AnswerverifiedShow Answer

The three financial ratios that constitute return on revenue are Cost of goods sold/Revenue,Research & Development expense/Revenue,and

Correct AnswerverifiedShow Answer

Which of the following best expresses fixed asset turnover?

Correct AnswerverifiedShow Answer

Return on risk capital primarily includes

Correct AnswerverifiedShow Answer

In an economic context,strategy for producers is primarily about

Correct AnswerverifiedShow Answer

Which of the following frameworks used to measure competitive advantage relies on both an internal and an external view of a firm?

Correct AnswerverifiedShow Answer

_____ of receivables turnover imply more efficient management in collecting accounts receivable and shorter durations of interest-free loans to customers.

Correct AnswerverifiedC

_____ indicates how much a firm benefits from interest-free loans extended by its suppliers and creditors.

Correct AnswerverifiedShow Answer

During the process of formulating an effective business model,a firm's managers should first

Correct AnswerverifiedShow Answer

_____ denotes the dollar amount a consumer would attach to a good or service.

Correct AnswerverifiedShow Answer

_____ are best described as the value of the best forgone alternative use of the resources employed.

Correct AnswerverifiedB

Which of the following statements is not true of competitive advantage?

Correct AnswerverifiedShow Answer

Which of the following is not an advantage of the balanced-scorecard approach to assess firm performance?

Correct AnswerverifiedShow Answer

The cost of capital to create a product is a fixed cost because it is

Correct AnswerverifiedShow Answer

Competitive advantage goes to the firm that achieves the

Correct AnswerverifiedShow Answer

_____ precisely indicates how much of a firm's sales is converted into profits.

Correct AnswerverifiedC

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C

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B

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C