Question 1

Which of these categories of financial ratios is used to measure the ability of a firm to meet its short-term financial obligations?
A) liquidity ratios
B) profitability ratios
C) activity ratios
D) leverage ratios

Accepted Answer

Liquidity ratios are used to assess a firm's ability to meet its short-term financial obligations. They measure the availability of cash and other liquid assets to cover short-term debts. Examples of liquidity ratios include the current ratio and quick ratio. Profitability ratios measure a firm's ability to earn profits, activity ratios measure how efficiently a company is using its resources, and leverage ratios measure the amount of debt the firm uses to finance its operations.

Question 2

The internal business perspective of the balanced scorecard answers which of the following questions?
A) How do customers see us?
B) What must we excel at?
C) How do we look to shareholders?
D) Can we continue to improve and create value?

Accepted Answer

The internal business perspective of the balanced scorecard answers the question "What must we excel at?" by focusing on the core business processes and operations that are critical to achieving the organization's strategic goals. This perspective looks at factors such as cost efficiency, productivity, quality, innovation, and time-to-market, and uses performance metrics to monitor and improve these processes.

Question 3

Which of the following would be most difficult to assess?
A) the liquidity position of a firm
B) market share growth
C) the legitimacy and reputation of a firm
D) the efficiency with which a firm utilizes its assets

Accepted Answer

The legitimacy and reputation of a firm can involve subjective opinions and perceptions from stakeholders, making it difficult to assess objectively. The other options (liquidity position, market share growth, asset utilization efficiency) can be measured using financial statements or industry benchmarks.

Question 4

The innovation and learning perspective of the balanced scorecard answers which of the following questions?
A) How do customers see us?
B) What must we excel at?
C) How do we look to shareholders?
D) Can we continue to improve and create value?

Accepted Answer

The innovation and learning perspective of the balanced scorecard is all about improving and creating value, so the answer is D. Option A is related to the customer perspective, option B is related to the internal business perspective, and option C is related to the financial perspective.

Question 5

The customer perspective of the balanced scorecard answers which of the following questions?
A) How do customers see us?
B) What must we excel at?
C) How do we look to shareholders?
D) Can we continue to improve and create value?

Accepted Answer

The customer perspective of the balanced scorecard is concerned with answering the question "How do customers see us?" by measuring and analyzing customer satisfaction, loyalty, and retention rates.

Question 6

An important implication of the balanced scorecard approach is that
A) managers need to recognize that satisfaction of stockholder demands is their primary job.
B) the emphasis on customer satisfaction and financial goals are only a means to that end.
C) managers should not look at their job as primarily balancing stakeholder demands.
D) gains in financial performance must come at a cost of employee satisfaction.

Accepted Answer

A key implication is that managers do not need to look at their job as balancing stakeholder demands. The balanced scorecard provides a win-win approach, increasing satisfaction among a wide variety of organizational stakeholders, including employees (at all levels), customers, and stockholders.

Question 7

A firm that takes on too much long-term debt to finance operations will see an immediate impact on its indicators of ________ financial leverage.
A) short-term
B) long-term
C) relative
D) comparable

Accepted Answer

Long-term. Long-term debt directly affects the long-term financial leverage of a firm, as it increases the firm's financial risk and obligation to pay back debt over an extended period of time. Short-term financial leverage would relate more to a firm's ability to meet its short-term obligations, such as accounts payable or short-term loans. Relative and comparable financial leverage refer to comparing a firm's financial leverage to that of its industry peers or benchmark companies.

Question 8

The internal measures should reflect business processes that have ________ impact on customer satisfaction. These include factors that affect cycle time, quality, employee skills, andproductivity.
A) the least
B) variable
C) the most
D) potential

Accepted Answer

The internal measures should reflect business processes that have the most impact on customer satisfaction. This means that factors that affect cycle time, quality, employee skills, and productivity should be measured and improved to ensure customer satisfaction.

Question 9

In making the decision to enter the pharmaceutical industry, a company would not need to consider which of the following?
A) historical comparisons
B) comparisons with industry norms
C) comparisons with key competitors
D) comparisons with non-competitors

Accepted Answer

In making the decision to enter the pharmaceutical industry, a company would need to consider historical comparisons, comparisons with industry norms, and comparisons with key competitors to evaluate the market potential and competitive landscape. However, comparisons with non-competitors would not provide relevant information for entering the pharmaceutical industry.

Question 10

Financial ratio analysis measures the performance of the firm based on all but which of the following?
A) balance sheet
B) market valuation
C) income statement
D) industry comparison

Accepted Answer

Financial ratio analysis a technique for measuring the performance of a firm according to its balance sheet, income statement, and market valuation.

Question 11

The balanced scorecard provides top managers with a ________ view of the business.
A) detailed and complex
B) simple and routine
C) fast but comprehensive
D) long-term financial

Accepted Answer

A balanced scorecard provides top managers with a fast but comprehensive view of the business. In a nutshell, it includes financial measures that reflect the results of actions already taken, but it complements these indicators with measures of customer satisfaction, internal processes, and the innovation and improvement activities of the organization.

Question 12

The balanced scorecard, developed by Kaplan and Norton, helps to integrate
A) financial analysis and the reputation of a firm.
B) intangible resources and operational measures.
C) financial analysis and stakeholder perspectives.
D) short-term perspectives and strategic positioning.

Accepted Answer

The balanced scorecard enables managers to consider their business from four key perspectives:customer, internal, innovation and learning, and financial.

Question 13

Making comparisons between a firm and its most direct rivals is useful because firms within the same strategic industry group have ________ strategies.
A) different
B) the same
C) similar
D) relative

Accepted Answer

Firms within the same strategic industry group have similar strategies. While there may be differences in execution and specific tactics, firms in the same industry tend to have similar goals and approaches to competing in the market. Therefore, making comparisons between a firm and its most direct rivals allows for a more accurate assessment of the firm's competitive position within the industry.

Question 14

The financial perspective of the balanced scorecard answers which of the following questions?
A) How do customers see us?
B) What must we excel at?
C) How do we look to shareholders?
D) Can we continue to improve and create value?

Accepted Answer

The financial perspective of the balanced scorecard answers the question "How do we look to shareholders?" It focuses on the financial performance of the organization and measures the success in terms of revenue growth, profitability, return on investment, and other financial metrics.

Question 15

The balanced scorecard enables managers to consider their business from all the following perspectives except
A) customer perspective.
B) internal perspective.
C) innovation and learning perspective.
D) ethical perspective.

Accepted Answer

The balanced scorecard includes four perspectives: customer, internal, innovation and learning, and financial. However, ethics is not included as a separate perspective in the balanced scorecard framework. It may be incorporated into the other perspectives, such as the customer perspective, where ethical considerations related to customer satisfaction may be evaluated.

Question 16

The best measure of company ability to meet imminent financial obligations is known as the
A) debt ratio.
B) profit margin.
C) total asset turnover.
D) current ratio.

Accepted Answer

The current ratio measures a company's ability to pay its short-term liabilities with its current assets. It is calculated by dividing current assets by current liabilities. A higher current ratio indicates that the company is more capable of meeting its immediate financial obligations. Therefore, it is the best measure for this purpose among the given options.

Question 17

Which of the following is a profitability ratio?
A) current ratio
B) total debt ratio
C) total asset turnover
D) return on equity

Accepted Answer

Return on equity is a profitability ratio that measures how much profit a company generates per dollar of shareholder equity. Choice A (current ratio) and choice B (total debt ratio) are liquidity ratios, while choice C (total asset turnover) is an efficiency ratio.

Question 18

Comparing your firm with all other firms in your industry assesses ________ performance.
A) excessive
B) consistent
C) relative
D) non-comparable

Accepted Answer

Comparing your firm with all other firms in your industry assesses relative performance. By comparing with industry standards and competitors, you can assess how well your firm is doing in comparison. This can help in identifying areas of weakness and areas where improvement is needed to stay competitive.

Question 19

________ ratios reflect whether a firm is efficiently using its resources,
A) Turnover
B) Leverage
C) Liquidity.
D) Profitability

Accepted Answer

Turnover ratios, such as asset turnover and inventory turnover, measure how quickly a company is using its assets and inventory to generate sales. A high turnover ratio indicates that the firm is effectively utilizing its resources and generating more sales with less investment. Hence, turnover ratios reflect whether a firm is efficiently using its resources.

Question 20

Apple Inc. reported revenues of 234 billion USD and net income of 53 billion USD in 2015. These figures represent a stunning annual growth in revenue and net income of 28 percent and 33 percent, respectively, for 2014. This information indicates the importance of using ________ to evaluate company financial performance.
A) financial ratios
B) industry norms
C) historical comparisons
D) competitor analysis

Accepted Answer

When evaluating company financial performance, it is very useful to compare its financial position over time. This provides a means of evaluating trends. For example, Apple Inc. reported revenues of 234 billion USD and net income of 53 billion USD in 2015. These figures represent a stunning annual growth in revenue and net income of 28 percent and 33 percent, respectively, for 2014. Had Apple's revenues and net income in 2015 been 150 billion USD and 30 billion USD, respectively, it would still be a very large and highly profitable enterprise. However, such performance would have significantly damaged the Apple market valuation and reputation as well as the careers of many of its executives.

Quiz 3: Assessing the Internal Environment of the Firm

Which of these categories of financial ratios is used to measure the ability of a firm to meet its short-term financial obligations?

The internal business perspective of the balanced scorecard answers which of the following questions?

Which of the following would be most difficult to assess?

The innovation and learning perspective of the balanced scorecard answers which of the following questions?

The customer perspective of the balanced scorecard answers which of the following questions?

An important implication of the balanced scorecard approach is that

A firm that takes on too much long-term debt to finance operations will see an immediate impact on its indicators of ________ financial leverage.

The internal measures should reflect business processes that have ________ impact on customer satisfaction. These include factors that affect cycle time, quality, employee skills, andproductivity.

In making the decision to enter the pharmaceutical industry, a company would not need to consider which of the following?

Financial ratio analysis measures the performance of the firm based on all but which of the following?

The balanced scorecard provides top managers with a ________ view of the business.

The balanced scorecard, developed by Kaplan and Norton, helps to integrate

Making comparisons between a firm and its most direct rivals is useful because firms within the same strategic industry group have ________ strategies.

The financial perspective of the balanced scorecard answers which of the following questions?

The balanced scorecard enables managers to consider their business from all the following perspectives except

The best measure of company ability to meet imminent financial obligations is known as the

Which of the following is a profitability ratio?

Comparing your firm with all other firms in your industry assesses ________ performance.

________ ratios reflect whether a firm is efficiently using its resources,