Deck 2: Sizing up a Business: a Non-Financial Perspective

Question 1

The economic size-up involves:

A)the relationship between overall economic activity and the industry's performance assessment of the economy.
B)identifying the current business cycle stage.
C)anticipation of the interest rate change.
D)All of the above.

Answer 1

D

Question 2

In order to understand a firm's current and anticipated financial position and needs,we must first:

A)understand overall economic conditions.
B)understand the industry in which it operates.
C)understand the strengths and weaknesses of the firm itself.
D)All of t he above.

Answer 2

D

Question 3

The financial management framework:

A)examines the factors in the external environment and its impact on the firm's operating decisions.
B)elaborates on the three main cash-related activities of the firm.
C)examines how value is created and measured.
D)All of the above.

Answer 3

D

Question 4

A comprehensive nonfinancial size-up is a useful tool for:

A)financial managers.
B)lenders.
C)investors.
D)All of the above.

Question 5

The two major components for sizing up a business are:

A)risk analysis and cash flow analysis.
B)cash flow analysis and risk management.
C)analyzing external environment and factors within the enterprise.
D)growth projections and risk analysis.

Question 6

The two key external factors that impact the firm's cash flows are:

A)the overall economy and future financing needs.
B)the overall economy and the nature and structure of the industry.
C)the level of interest rates and working capital requirements.
D)working capital requirements and growth projections.

Question 7

Gross domestic product product (GDP)is a measure of:

A)the total amount of goods and services sold over a particular period of time.
B)the total amount of goods and services produced over a particular period of time.
C)the projected amount of goods and services to be produced over a particular period of time.
D)None of the above.

Question 8

Information for the sizing-up process for publicly traded firms can be obtained from:

A)the firm's annual report.
B)the firm's 10-K report filed with the Securities & Exchange Commission.
C)industry reports.
D)All of the above.

Question 9

The financial management framework focuses on which three areas of decision-making?

A)Operating,investing,and profitability.
B)Profitability,financing,and investing.
C)Investing,financing,and operating.
D)Operating,financing,and profitability.

Question 10

A comprehensive nonfinancial size-up should be done:

A)monthly.
B)quarterly.
C)annually.
D)as needed.
E)All of the above.

Question 11

Which of the following statements are NOT true?

A)Peaks in the business cycle tend to occur when the capacity-to-output gap is the largest.
B)Peaks in the business cycle tend to occur when the capacity-to-output gap is the smallest.
C)Troughs occur when the capacity-to-output gap is the largest.
D)None of the above.

Question 12

Which of the following is NOT a component of GDP?

A)Consumer sector
B)Business investment sector
C)Government sector
D)Healthcare sector

Question 13

One of the most important reasons for understanding the overall economy is:

A)changing economic activity will impact the current business cycle stage.
B)changing economic activity will directly impact revenues.
C)changing economic activity will increase profits.
D)All of the above.

Question 14

Which of the following is NOT considered to be a factor that affects the external environment in which a firm operates?

A)Interest rates
B)Credit conditions
C)Dividend policy
D)Expansion and recession of the economy

Question 15

A comprehensive nonfinancial size-up is:

A)a critical component in analyzing the firm's strengths and weaknesses.
B)critical in understanding the firm's historical position.
C)critical in anticipating future financing needs.
D)All of the above.

Question 16

The overall goal in sizing up each of the external and internal factors is to:

A)determine the competitive position of the firm relative to its competitors.
B)increase the value of the enterprise.
C)assess the company's strengths and weaknesses.
D)make better investment decisions.

Question 17

The business size-up involves:

A)an external assessment of the industry.
B)an external assessment of the economy.
C)an internal assessment of the firm's strengths and weaknesses.
D)All of the above.

Question 18

When a country imports more than it exports,it will:

A)be known as a net importing country and this portion of the GDP will have positive value.
B)be known as a net importing country and this portion of its GDP will have a negative value.
C)be known as a net exporting country and this portion of its GDP will have a positive value.
D)be known as a net exporting country and this portion of its GDP will have a negative value.

Question 19

All of the following statements are true EXCEPT:

A)when changes in real GDP are positive,the economy is said to be expanding.
B)peaks in the business cycle tend to occur when the capacity-to-output is smallest.
C)troughs occur when the capacity-to-output gap is the largest.
D)two consecutive quarterly declines in GDP are generally said to be a recession.

Question 20

All of the following are important factors in the economy EXCEPT:

A)technology.
B)interest rates.
C)financial markets.
D)credit conditions.

Question 21

The sizing up of the industry involves:

A)an external assessment of the industry.
B)identifying the industry life cycle stage.
C)the nature and intensity of the competition.
D)All of the above.

Question 22

Initial public offerings are more frequently issued during which stage of the industry life cycle?

A)Stage 1 - start-up stage
B)Stage 2 - rapid growth and little competition stage
C)Stage 3 - intense competition stage
D)Stage 4 - stabilization and maturity stage

Question 23

What are the goals of the Federal Reserve and how does the Federal Reserve attempt to control inflation"? Why is low and steady inflation important?

Question 24

Stage 2 of the industry life cycle is characterized by all of the following EXCEPT:

A)there is little demand for the company's products and services.
B)the firm's revenue tends to grow rapidly.
C)positive profits begin to materialize.
D)private firms begin to "go public."

Question 25

Generally in the short run,a county's actual output of goods and services increases the same rate as the country's capacity.

Question 26

Which of the following is NOT considered to be a factor that affects the industry in which a firm operates?

A)Technology
B)Credit conditions
C)Interest rates
D)Regulations

Question 27

The ultimate goal of sizing up the industry is to:

A)identify the industry life cycle.
B)identify the key success factors that are necessary for the firm to successfully compete in the industry.
C)monitor the nature and intensity of the competition.
D)All of the above.

Question 28

An industry analysis is critical to better understand a firm's financial position because:

A)it provides insight into how the firm's financial needs might change as industry conditions change.
B)it helps identify the key risks and opportunities facing the firm.
C)it provides better insight into how maximize the firm's current financial position relative to its competitors.
D)All of the above.

Question 29

What are the three shapes of the yield curve that tend to be associated with different stages of the business cycle? How would you categorize the current business cycle? Explain your answer.

Question 30

The shape of the yield curve is important for which of the following reasons?

A)It provides an indication of the anticipated change in interest rates.
B)It provides an indication of the borrowing costs for corporation.
C)It provides clues about the economy's current position in the business cycle.
D)All of the above.

Question 31

Different sectors or industries grow or shrink at various stages in the business cycle.Which statement is true?

A)Utilities tend to do relatively better in the early stages of an expansion.
B)Basic materials tend to do well in the early stages of a recession.
C)Healthcare tends to do well at the peak of an expansion.
D)The financial sector tends to do relatively better in the early stages of an expansion.

Question 32

Describe the four stages of the business cycle.What are the characteristics of each stage and how would a financial manager adjust their strategic and tactical planning for changes in the business cycle?

Question 33

Which of the following is NOT a question related to the analysis of the overall economy?

A)What is the current business cycle stage?
B)How profitable is the industry cycle?
C)How important are interest rates in the financial position of the firm within the industry?
D)How easy is it to obtain debt and equity financing?

Question 34

The Fed's primary goals are:

A)maintaining stable prices.
B)maintaining low or steady inflation.
C)maximizing employment.
D)All of the above.

Question 35

Stage 3 of the industry life cycle is characterized by all of the following EXCEPT:

A)competition intensifies as more and more firms enter the industry.
B)there is little demand for the company's products and services.
C)revenues continue to grow,but at a slower pace.
D)firms become more efficient at maintaining costs.

Question 36

The overall goal in sizing up each external and internal factor is to increase the value of the firm.

Question 37

Stage 1 of the industry life cycle is characterized by all of the following EXCEPT:

A)there is little demand for the company's products and services.
B)the firm's revenue is low but there are high prospects for growth.
C)competition is fierce and profit margins begin to narrow.
D)firms need a significant amount of cash in order to grow.

Question 38

Stage 2 of the industry life cycle is characterized by all of the following EXCEPT:

A)this is a phase of stabilization and maturity.
B)this stage does not last very long.
C)growth in revenue tends to occur at the same rate as the frowth in the overall economy.
D)All of the above.

Question 39

Capital market conditions affect the timing of a new equity issue.

Question 40

Capital market conditions can affect the timing of a new equity issue because:

A)Issuing new equity may be harder when stock prices are rising.
B)Issuing new equity may be easier when stock prices are rising.
C)Issuing new equity may be harder when stock prices are falling.
D)B and C

Question 41

When sizing up the operations of the firm,it is important to examine:

A)the level of technological innovation and investments of the firm.
B)the level of skill of the firm's work force.
C)the capacity of the firm's plant or facilities.
D)All of the above.

Question 42

How is the typical profitability of a stage 2 firm different from a stage 1 and a stage 3 firm?

Question 43

When sizing up the operations of the firm,it is important to examine:

A)the quality of the firm's products or services.
B)how effective the processes are that the firm employs to operate the business.
C)the capacity of the firm's plant or facilities.
D)All of the above.

Question 44

Which of the following is NOT considered to be one of Michael Porter's Five Forces?

A)Threat of new entrants
B)Bargaining power of suppliers
C)Threat of substitute products or services
D)Diminished rivalry among current competitors

Question 45

The bargaining power of suppliers and customers will impact the profitability of the industry because:

A)powerful suppliers can exert pressure to raise prices.
B)powerful customers can exert pressure by forcing down prices.
C)powerful customers can exert pressure by demanding higher quality.
D)All of the above.

Question 46

All operating systems involved what is known as the Six P's of Operations,which include:

A)product quality,profitability,and people.
B)process,plant,and profitability.
C)product quality,process,and people.
D)product potential,plant,and partners.

Question 47

Intense rivalry among existing firms can result in:

A)the introduction of new products or services.
B)lower profit margins as competitors jockey for position.
C)decreased capacity.
D)Both A and B.

Question 48

All of the political factors can give managers further insights into the opportunities and risks facing a particular industry EXCEPT:

A)favorable tax changes or incentives in the industry.
B)pending and new government relations.
C)nature and intensity of competition.
D)demographic changes in the population.

Question 49

Which of the following is TRUE about the threat of new entrants?

A)New entrants often increase capacity within the industry.
B)The easier to enter an industry,the higher the profit margins and growth potential.
C)If competitors are strong,existing competitors will not react strongly to any new entrants.
D)If there are huge barriers to entry,competitors will be attracted to the industry.

Question 50

All of these social factors can give managers further insights into the opportunities and risks facing a particular industry EXCEPT:

A)aging of the population.
B)new technology developments.
C)greater health consciousness.
D)obesity concerns.

Question 51

The firm's supply risk can best be analyzed by examining:

A)the components of the firm's operations management.
B)the components of the firm's operations management compared with the key industry success factors.
C)the key industry success factors and their impact on profitability.
D)the behavior of the firm's major competitors.

Question 52

Which of the following is NOT a question related to an industry analysis?

A)How close is the firm to full capacity?
B)In what industry life cycle is the firm?
C)How profitable is the industry?
D)What are the overall prospects for revenue frowth and increased profitability in the industry?

Question 53

Which of the following is TRUE about the threat of substitutes?

A)When threatened by substitutes,existing competitors will increase their prices.
B)Innovation makes an existing product or service more attractive to its customers.
C)If there are numerous substitutes,the firm's profit margins and revenues will decline.
D)If the competitors are strong,existing competitors will not react strongly to the threat of substitutes.

Question 54

Which of the following is TRUE about the threat of substitutes?

A)When threatened by substitutes,existing competitors will increase their prices.
B)innovation makes an existing product or service more attractive to its customers.
C)If there are numerous substitutes,the firm's profit margins and revenues will decline.
D)If the competitors are strong,existing competitors will not react strongly to the threat of substitutes.

Question 55

What are Michael Porter's Five Forces that govern the competition within an industry? How do these forces impact overall growth opportunities within an industry?

Question 56

Sizing up operation management involves:

A)identifying the firm's strengths and weaknesses related to operations.
B)an external assessment of the industry.
C)an internal assessment of the firm's strengths and weaknesses.
D)All of the above.

Question 57

Value is created when the industry is profitable and the firm is in a disadvantaged competitive position within the industry.

Question 58

The structure of competitive forces establishes the profitability of an industry.

Question 59

A PEST analysis involves an analysis of which of these factors?

A)Technological,societal,economic factors,and potential threats
B)Societal,technological,political,and economic factors
C)Strengths,threats,economic and political factors
D)Strengths,threats,potential opportunities,and external environment factors

Question 60

An analysis of the industry's technological improvements can help managers better identify which of these trends are occurring within a particular industry?

A)Major efficiency gains.
B)Reductions in overhead
C)Lower production costs
D)All of the above

Question 61

Sizing up marketing management involves:

A)identifying the firm's strengths and weaknesses related to marketing.
B)identifying the target market.
C)identifying the appropriate marketing mix
D)All of the above.

Question 62

The strategic and tactical choices that a firm makes lead to the firm's marketing mix which is referred to as the Four P's of Marketing.They are:

A)distinguishing between who buys the product and who consumes it.
B)determining the channel through which the product or service is purchased.
C)assessing the firm's plant capacities.
D)determining the unique features of the target market.

Question 63

Value proposition refers to a statement that describes the unique features of the firm's products and services.

Question 64

The firms' supply risk can best be analyzed by examining the components of the firm's operations management compared with the key industry success factors.

Question 65

The size and current growth stage of the firm must also be considered as a part of the marketing analysis.

Question 66

When sizing up the marketing management of the firm,it is important to examine:

A)the level of technological innovation and investment of the firm.
B)the firm's particular target market.
C)the product's critical physical and intangible attributes.
D)Both B and C

Question 67

Sizing up human resource management involves:

A)identifying the firm's strengths and weaknesses related to human resource management.
B)an external assessment of the industry.
C)an internal assessment of the firm's strengths and weaknesses.
D)None of the above.

Question 68

When sizing up the operations of the firm,it is important to examine all of these EXCEPT:

A)the current labor environment.
B)the skill level of the firm's work force.
C)the capacity of the firm's plant or facilities.
D)None of the above.

Question 69

Demand risk refers to the probability that actual supply for the products or services will exceed anticipated supply.

Question 70

Which of the following is NOT a question related to operations management and supply risk analysis?

A)How close is the firm to full capacity?
B)Are the products appropriate relative to the competitors' products?
C)How much inventory is required to meet demand?
D)How critical are technological innovations and investments?

Question 71

Value proposition refers to:

A)a statement that describes the benefits of the firm's products and services.
B)a statement that describes the unique features of the firm's products and services.
C)a statement that describes why a specific target customer should choose the firm's products or use its services.
D)None of the above.

Question 72

Managing the firm's supply network is important because:

A)the firm is reliant on the efforts of its supply network partners in order to produce its products and/or services.
B)managers must manage the supply network for efficient,responsive procurement and distribution to meet their customers' needs.
C)plant or facilities management involves ensuring sufficient capacity or maximum output is available.
D)Both A and B

Question 73

The firm's demand risk can best be analyzed by examining:

A)the components of the firm's marketing plan.
B)the components of the firm's marketing management compared with the key industry success factors.
C)the key industry success factors and their impact on profitability.
D)the behavior of the firm's major competitors.

Question 74

Marketing analysis involves all of the following EXCEPT:

A)distinguishing between who buys the product and who consumes it.
B)determining the channel through which the product or service is purchased.
C)assessing the firm's plant capacities.
D)determining the unique features of the target market.

Question 75

Which one of the following statements is true?

A)Plant or facilities management involves ensuring sufficient capacity or maximum output is available.
B)People or labor management involves hiring and maintenance of a sufficiently skilled work force.
C)Parts or inventory management involves tradeoffs between maintaining huge amounts of inventory to ensure any demand for the product can be readily met and the costs associated with maintaining huge amounts of inventory.
D)All of the above.

Question 76

Which of the following is NOT a question related to marketing management and demand risk analysis?

A)Is the distribution channel appropriate?
B)Is the product appropriate relative to the competitors?
C)How much marketing management depth does the firm have?
D)Who are the firm's target customers?

Question 77

A firm is considering whether to out source some aspects of the manufacturing of its products.Which one of the Six P's of Operations is the firm addressing?

A)Product quality
B)Process
C)Plant
D)People

Question 78

Managers must manage the supply network for efficient,responsive procurement and distribution to meet their customers' needs.

Question 79

A firm is evaluating the best means to have a positive impact on potential buyers; which one of the four P's is the firm addressing?

A)Product
B)Price
C)Place
D)Promotion

Question 80

Demand risk refers to:

A)the probability that actual supply for the products or services will exceed anticipated supply.
B)the probability that actual supply for the products or services will fall short of anticipated supply.
C)the probability that actual demand for the products or services will exceed anticipated demand.
D)the probability that actual demand for the products or services will fall short of anticipated demand.