Fred r david – strategic management, 13th edition ch09

Return on assets is the most widely used technique for determining whether debt, stock, or a combination of debt and stock is the best alternative for raising capital to implement strate

Name _

TRUE/FALSE Write 'T' if the statement is true and 'F' if the statement is false

1)

Less than 2 percent of formulated strategies are successfully implemented 1)

_

2)

Given that most information on individuals is available online, the extent to which companies can track individuals' movements on the Internet is not a marketing issue of great concern to consumers today 2)

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3)

Market penetration can be defined as the subdividing of a market into distinct subsets of customers according to needs and buying habits

3)

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4)

The marketing mix component factors are product, place, promotion, price and people 4)

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5)

With market segmentation, a firm can better operate with limited resources 5)

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6)

The most common bases for segmenting markets are geographic and demographic 6)

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7)

Segmentation often reveals that large, random fluctuations in demand actually consist of several small, predictable, and manageable patterns

7)

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8)

Segmenting industrial markets is generally simpler and easier than segmenting consumer markets 8)

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9)

Generally, market segmentation is followed by a market diversification strategy 9)

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10)

After segmenting markets so that a firm can target particular customer groups, the next step is to find out what customer groups want and expect

10)

11)

In general, the Internet makes market segmentation easier 11)

12)

Multidimensional scaling involves examining three or more criteria simultaneously in a product-positioning analysis

12)

13)

A firm can usually serve two or more market segments with the same strategy 13)

14)

It is acceptable for firms to create expectations that exceed the service that can or will be offered, if it will attract customers

14)

15)

Return on assets is the most widely used technique for determining whether debt, stock, or a combination

of debt and stock is the best alternative for raising capital to implement strategies

15)

16)

Besides net profit from operations and the sale of assets, the two basic sources of funds for an ongoing enterprise are debt and equity

16)

17)

In low earning periods, too much debt in the capital structure of an organization can endanger stockholders' returns and jeopardize company survival

17)

18)

Additional capital is often required for successful strategy implementation 18)

19)

An EPS/EBIT chart can be constructed to determine the breakeven point, where one financing alternative becomes more attractive than another

19)

20)

A reason for concern over the dilution of company stock is a possible hostile takeover 20)

21)

When additional debt is issued to finance implementation of strategy, both ownership and control of the enterprise are diluted

21)

22)

In times of depressed stock prices, stock issuances often prove to be the most suitable alternative for obtaining capital

22)

23)

A projected financial analysis can be used to forecast the impact of various implementation decisions 23)

24)

When performing pro forma financial analyses, the balance sheet should be prepared before the income statement

24)

25)

The percentage-of-sales method should be used for computing the cost of goods sold and additional expense items in projected income statements

25)

26)

The cash account is used as a plug figure in pro forma balance sheets 26)

27)

The Sarbanes-Oxley Act of 2002 has eliminated the problem of firms inflating their financial projections, so stakeholders need not worry about the financial projections of different companies

27)

28)

A financial budget is a document that details how funds will be obtained and spent for a specified period oftime

28)

29)

Limiting an organization's expenditures is the primary purpose of financial budgets 29)

30)

The most common type of financial budget is the capital budget 30)

31)

Although cash budgets can be a useful financial tool, publicly held companies are not required to completethem

31)

32)

A limitation of financial budgets is that they can hide inefficiencies, if they are based solely on precedent rather than on periodic evaluation of circumstances and standards

32)

33)

All the methods for determining a business' worth can be grouped into three basic approaches what a firm owns, what a firm earns, and what a firm spends

33)

34)

A conservative rule of thumb for estimating a business' worth is that it is 10 times the firm's most current annual profit

34)

35)

A recommended approach for determining a firm's worth is to base the analysis on the selling price of a similar company

35)

36)

To determine the price-earnings ratio, divide the market price of the firm's annual earnings per share by the common stock, and multiply this number by the firm's average net income for the past 10 years 36)

37)

Goodwill is the estimated values associated with a name brand 37)

38)

The costs of paying lawyers, accountants, and underwriters when engaging in initial public offerings (IPO) is substatially higher in the Arab world than in the Western world

38)

39)

It is generally not recommended for companies with less than $10 million in sales to go public 39)

40)

In general, there are very little costs associated with going public 40)

41)

Buying off the outstanding shares of your company from the open market to make the company private is what going public means

41)

42)

If the rate of market growth and technical progress is fast and there are few barriers to possible new entrants, then in-house R&D is the preferred solution

42)

43)

According to research, the most successful organizations use a research and development strategy that ties internal strengths to external opportunities and is linked with corporate objectives

43)

44)

R&D policies can enhance strategy implementation efforts to emphasize product or process improvements.

44)

45)

A major effort in R&D may be very risky if technology is changing rapidly and the market is growing slowly 45)

46)

One R&D strategy is to be an innovative imitator of successful products 46)

47)

A current trend in R&D management involves the lifting of the veil of secrecy whereby firms, even major competitors, are joining forces to develop new products

47)

48)

The process of strategic management is facilitated immensely in firms that have an effective information system

48)

49)

Increased costs are a disadvantage of a good information system 49)

50)

With information technology, in some cases it is possible to do away with the workplace by allowing employees to work at home or anywhere, anytime

What percent of strategies formulated are successfully implemented? 51)

A)

More than 80 percent

B)

Less than 10 percent

C)

Approximately 66 percent

D)

About 30 percent

E)

Between 40 to 60 percent 52)

What level of management is directly affected by strategy implementation? 52)

A)

Sales managers

B)

Project managers

C)

Division managers

D)

Plant managers

E)

all of these 53)

All of the following are examples of marketing decisions that require policies except

53)

A)

to use heavy, light, or no TV advertising

B)

to advertise online or not

C)

to offer a complete or limited warranty

D)

to use exclusive dealerships or multiple channels of distribution

E)

to be a market leader or follower 54)

Which two variables are of central importance to strategy implementation? 54)

A)

Competition and collaboration

B)

Product development and market development

C)

Marketing penetration and competition

D)

Diversification and budgeting

E)

Market segmentation and product positioning 55)

Subdividing a market into distinct subsets of customers according to their needs and the way they buy anduse a product or service is

55)

A)

positioning

B)

market segregation

C)

market segmentation

D)

product diversification

E)

market penetration 56)

Why is market segmentation an important variable in strategy implementation? 56)

A)

Mass production, mass distribution and mass advertising are not always required

B)

All company strategies require increased sales through new markets and products

C)

It allows a firm to operate with limited resources

D)

Market segmentation decisions directly affect marketing mix variables

E)

all of the above 57)

Which of the following variables are not directly affected by market segmentation? 57)

A)

Promotion

B) Process

C) Product

D) Price

E) Place

58)

Why is market segmentation an important variable in the strategy-implementation process? 58)

A)

It directly affects marketing mix variables

B)

It allows a firm to minimize per-unit profits and per-segment sales

C)

It allows a firm to operate with no resources

D)

Company strategies do not require increased sales through new markets and products

E)

all of the above 59)

Perhaps the most dramatic new market segmentation strategy is the 59)

A)

treatment of industrial markets

B)

focusing on universal products

C)

targeting of regional tastes

D)

preference for international over domestic sales

E)

none of these 60)

Matching of which factors would allow factories to produce desirable levels without extra shifts, overtime

or subcontracting?

60)

A)

Markets and competitors

B)

Competition and positioning

C)

Segments and demand

D)

Customer behavior and positioning

E)

Supply and demand 61)

Which variable would be considered part of the product element of the marketing mix? 61)

A)

Advertising

B)

Inventory levels and location

C)

Publicity

D)

Packaging

E)

Payment terms 62)

Which variable would be considered part of the place element of the marketing mix? 62)

A)

Product line

B)

Sales territory

C)

Service level

D)

Personal selling

E)

Discounts and allowances 63)

What entails developing schematic representations that reflect how products or services compare to competitors', on the dimensions that are most important to success in the industry?

63)

A)

Segmentation

B)

Positioning

C)

Penetration

D)

Budgeting

E)

Diversification 64)

Looking for a vacant niche helps a company determine 64)

A)

its projected R & D expenditures

B)

its advertising budget

C)

the size of the marketing department

D)

the best place to position a product

E)

the best place to locate a new facility 65)

Multidimensional scaling is used to determine 65)

A)

the size of a new department

B)

product positioning

C)

the size of a new building

D)

market segmentation

E)

the amount of high-tech equipment a firm needs 66)

Which of the following is (are) true about two different market segments? 66)

A)

They usually require different marketing strategies

B)

They can usually be served with the same marketing strategy

C)

They are most effective when a firm squats between two segments

D)

They are usually incompatible

E)

They are always in different geographic locations 67)

Which of the following is not an example of a decision that may require finance/accounting policies? 67)

A)

To determine the amount of product diversification

B)

To extend the time of accounts receivable

C)

To establish a certain percentage discount on accounts within a specified period of time

D)

To lease or buy fixed assets

E)

To use LIFO, FIFO, or a market-value accounting approach 68)

In the low earnings period, too much in the capital structure of an organization can endanger stockholders' return and jeopardize company survival

68)

A)

equity

B)

debt

C)

tax

D)

liquid assets

E)

cash 69)

Which of these obligations generally must be met, regardless of circumstances? 69)

A)

Equity

B)

Employee

C)

Fixed debt

D)

Dividends

E)

all of these 70)

What is the most widely used technique for determining the best combination of debt and stock? 70)

A)

Gross profit analysis

B)

Debt-to-stock ratio

C)

Present value analysis

D)

Capital asset pricing model

E)

Earnings Per Share/Earnings Before Interest and Taxes analysis 71)

After completing an EPS/EBIT analysis, what conclusions would you make if the debt line is above the stockline throughout the range of EBIT on the graph?

71)

A)

The company should be privately owned

B)

Dividends must be considered before conclusions can be made

C)

Stock would be the best financing alternative

D)

A combination of debt and stock is probably the best financial alternative

E)

Debt appears to be the best financing alternative 72)

What becomes a more attractive financing technique when cost of capital is high? 72)

A)

Borrowing

B)

Debt

C)

Cost cutting

D)

Stock issuance

E)

Staying privately owned 73)

What is a drawback of using only equity to raise capital? 73)

A)

That it doesn't raise as much capital as debt financing

B)

Fluctuations in the stock market

C)

Dilution of the control of the company

D)

That it will cause EPS to roller-coaster

E)

The cost 74)

A benefit of using projected balance sheets and income statements is that 74)

A)

all of the above

B)

insurance needs can be computed

C)

it is useful in analyzing past performance

D)

an organization can compute projected financial ratios under various scenarios

E)

money can be put aside to pay future income taxes 75)

P r o j e c t e d fi n a n c i a l a n a l y s i s i s a n i m p o r t a n t s t r a t e g y -implementation technique because

75)

A)

it is an exact measurement of financial costs in the future

B)

insurance needs can be computed

C)

it is an exact measurement of future company profits

D)

it allows an organization to examine the expected results of various actions and approaches

E)

none of the above 76)

What is a central strategy-implementation technique that allows an organization to examine the expected results of various actions and approaches?

76)

A)

EPS/EBIT

B)

Financial budgeting

C)

TOWS analysis

D)

External analysis

E)

Projected financial statement analysis 77)

The first step in preparing a projected statement is to 77)

A)

prepare the projected balance sheet

B)

calculate the projected net income

C)

take an inventory of goods

D)

prepare the projected income statement

E)

estimate increases in debt 78)

In preparing projected statements, which of these methods is recommended to project cost of goods sold and the expense items in the income statement?

78)

A)

Outstanding shares method

B)

Price-earnings ratio met

C)

Determining the net worth method

D)

Percentage-of-sales method

E)

What a firm earns method 79)

Which element in the projected income statement cannot be forecasted using the percentage-of-sales method?

79)

A)

Administrative expense

B)

Interest expense

C)

Cost of goods sold

D)

Selling expense

E)

All of these items are forecasted using the percentage-of-sales method 80)

Retained earnings is obtained by subtracting 80)

A)

interest expense from EBT

B)

taxes from EBIT

C)

any dividends from net income

D)