Test bank of fred r david – strategic management, 13th edition ch09

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 str

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

In low earning periods, too much debt in the capital structure of an organization can endanger

stockholders' returns and jeopardize company survival

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)

C) Product

D) Price

E) Place

58)

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

58)

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

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

A)

Flexible

B) Cash

C) Sales

D) Factory

E) Profits

C) Congress

D) SEC

E) FCC

It is known only to the firm's accountants

What are the marketing-mix component factors? Give some examples of each

102)

What are the five steps required for effective product positioning? Give an example of a

product-positioning matrix for an organization of your choice

8) FALSE 9) FALSE 10) TRUE 11) TRUE 12) TRUE 13) FALSE 14) FALSE 15) FALSE 16) TRUE 17) TRUE 18) TRUE 19) TRUE 20) TRUE 21) FALSE 22) FALSE 23) TRUE 24) FALSE 25) TRUE 26) TRUE 27) FALSE

28) TRUE 29) FALSE 30) FALSE 31) FALSE 32) TRUE 33) FALSE 34) FALSE 35) FALSE 36) FALSE 37) FALSE 38) FALSE 39) TRUE 40) FALSE 41) FALSE 42) FALSE 43) TRUE 44) TRUE 45) TRUE 46) TRUE 47) TRUE

48) TRUE 49) FALSE 50) TRUE 51)

B 52)

E 53)

E 54)

E 55)

C 56)

E 57)

B 58)

A 59)

C 60)

E 61)

D 62)

B 63)

B 64)

D 65)

B 66)

A 67)

A

68)

B 69)

C 70)

E 71)

E 72)

D 73)

C 74)

D 75)

D 76)

E 77)

D 78)

D 79)

B 80)

C 81)

A 82)

B 83)

C 84)

B 85)

A 86)

B 87)

E

a single customer; 4) to be a price leader or a price follower; 5) to offer a complete or limited warranty; 6)

to reward salespeople based on straight salary, straight commission, or a combination salary/commission; 7) to advertise online or not

100)

Two variables of central importance to strategy implementation are market segmentation and product positioning Segmentation is important because it is a key to matching supply and demand, which is one ofthe thorniest problems in customer service Segmentation often reveals that large, random fluctuations in demand actually consist of several small, predictable and manageable patterns Product positioning is important because it is a severe mistake to assume the firm knows what customers want and expect Many firms have become successful by filling the gap between what customers and producers see as goodservice What the customer believes is good service is paramount, not what the producer believes service should be Positioning entails developing schematic representations that reflect how a firm's products or services compare to competitors' on dimensions most important to success in the industry

101)

The marketing-mix component factors consist of product, place, promotion and price Please refer to Table 9-1 on page 294 for examples of each factor

102)

There are five steps required for effective product positioning; as follows 1) select key criteria that

effectively differentiate products or services in the industry; 2) diagram a two-dimensional

product-positioning map with specified criteria on each axis; 3) plot major competitors' products or services in the resultant four-quadrant matrix; 4) identify areas in the positioning map where the company's products or

services could be most competitive in the given target market and look for niches; and 5) develop a

marketing plan to position the company's products or services appropriately

Student examples of product-positioning matrices will vary

103)

Possible answers include 1) to raise capital with short-term debt, long-term debt, preferred stock, or

common stock; 2) to lease or buy fixed assets; 3) to determine an appropriate dividend payout ratio; 4) to use LIFO, FIFO, or a market-value accounting approach; 5) to extend the time of accounts receivable; 6) to establish a certain percentage discount on accounts within a specified period of time; 7) to determine the amount of cash that should be kept on hand

104)

There are four considerations for EPS/EBIT analysis 1) profit levels may be higher for stock or debt

alternatives when EPS levels are lower; 2) flexibility; 3) dilution of ownership can be an overriding concern

in closely held corporations, in which stock issuances affect the decision-making power of majority

stockholders; and 4) timing in relation to movements of stock prices, interest rates and bond prices

becomes important

105)

The steps to performing a projected financial analysis are as follows

1) prepare the projected income statement before the balance sheet, and start by forecasting sales as accurately as possible;

2) use the percentage-of-sales method to project CGS and the expense items in the income statement; 3) calculate the projected net income;

4) subtract from the net income any dividends to be paid and add the remaining net income to Retained Earnings;

5) project the balance sheet items, beginning with retained earnings and then forecasting stockholders' equity, long-term liabilities, total liabilities, total assets, fixed assets and current assets – in that order; and 6) list comments on the projected statements

106)

The three approaches for determining a business' worth are what a firm owns, what a firm earns and what

a firm will bring in the market Please see the discussion on page 311 under "Evaluating the Worth of a Business" for descriptions of each approach

technology is changing rapidly, and the market is growing slowly, then a major in-house effort in R&D may

be risky Third, if technology is changing slowly but the market is growing quickly, there generally is not enough time for in-house development Finally, if both technological progress and market growth are fast, R&D expertise should be obtained through acquisition of a well-established firm in the industry

109)

The three major R&D approaches for implementing strategies are 1) to be the first firm to market new technological products; 2) to be an innovative imitator of successful products, thus minimizing the risks and costs of start-up; and 3) to be a low-cost producer by mass-producing products that are similar to but less expensive than products that have been recently introduced

See pages 316-317 under R&D Issues for descriptions of each approach