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d. specify what information a customer’s employer can release about him/her.
Match the term with its definition. Some terms may not be used.
a. Consumer credit
b. Credit bureaus
c. Credit card
d. Credit
e. Installment account
f. Open charge account
g. Revolving charge account
h. Trade credit
i. Trade credit agencies
j. Value
91. Financing granted by retailers to individuals who purchase for personal or family use
92. A line of credit that allows the customer to obtain a product or service at the time of purchase, with the payment due
when billed
93. An agreement between a buyer and a seller that allows for delayed payment for a product or service
94. Privately owned organizations that collect credit information on businesses
95. A line of credit on which the customer may charge purchase at any time, up to a pre-established limit
96. Privately owned organizations that summarize a number of firms’ credit experiences with particular individuals
97. A line of credit that requires a down payment, with the balance paid over a specified period of time
98. Financing provided by suppliers to client companies
99. The extent to which a good or service is perceived by a customer as meeting his or her needs or wants, measured by
the customer’s willingness to pay for it
100. An alternative to cash whose use provides assurance to a seller that a buyer has a satisfactory credit rating and that
payment will be received from the issuing financial institution
Match the term with its definition. Some terms may not be used.
a. Aging schedule
b. Average pricing
c. Bad-debt ratio
d. Break-even analysis
e. Break-even point
f. Contribution margin
g. Elastic demand
h. Elasticity of demand
i. Inelastic demand
j. Value
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101. The difference between the unit selling price and the unit variable costs and expenses
102. The extent to which a good or service is perceived by a customer as meeting his or her needs or wants, measured by
the customer’s willingness to pay for it
103. The ratio of bad debts to credit sales
104. Demand that changes significantly when there is a change in the price of a product or service
105. Sales volume at which total sales revenue equals total costs and expenses
106. The degree to which a change in price affects the quantity demanded
107. A categorization of accounts receivable based on the length of time they have been outstanding
108. Demand that does not change significantly where there is a change in the price of a product or service
109. The examination of cost-revenue relationships and the incorporation of sales forecasts into the analysis
Match the term with its definition. Some terms may not be used.
a. Product line pricing
b. Average pricing
c. Follow-the-leader pricing
d. Markup pricing
e. Freemium strategy
f. Prestige pricing
g. Price lining strategy
h. Price
i. Skimming price strategy
j. Value
k. Variable pricing strategy
110. An approach based on applying a percentage to a product’s cost to obtain its selling price
111. A technique that prices on a range of products or services to reflect the benefits to the customer of parts of the range
112. A technique that sets very high prices for a limited period before reducing them to more competitive levels
113. An approach based on setting a high price to convey an image of high quality or uniqueness
114. An approach in which the total cost for a given period is divided by the quantity sold in that period to set a price
115. A specification of what a seller requires in exchange for transferring ownership or use of a product or service
116. A technique that sets more than one price for a product or service in order to offer price concessions to certain
customers
117. A technique that sets a range of several distinct merchandise price levels
118. A technique that uses a particular competitor as a model in setting prices
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119. A strategy that offers customers basic features at no cost with the idea that they will upgrade to advanced products
or services at subscription prices
120. Layla is a well-known successful movie star who recently retired and just started designing handbags. She has
opened a boutique business in her home town, which has no national department stores. She hopes to attract other
celebrities, tourists, and local residents to shop at her store. She is considering pricing strategies for her products. Which
strategy would best fit her image and product?
121. Discuss accounts receivable management methods in a small business.
122. List and describe the three types of credit.
123. After defining three pricing strategies, state when a small business would best use the strategy.
124. How are the two components of total cost related to variable and fixed costs? Use a clothing retailer to illustrate the
costs.
125. Explain the relationship between the break-even point and the contribution margin. How does demand affect this
relationship?
126. What are the five factors that entrepreneurs need to consider with deciding to extend credit.
127. Contrast penetration price and skimming price strategies.
128. What would be the break-even point in units for a firm selling trekking poles at a selling price of $130 per pair,
variable cost per set is $70, and fixed costs are $100,000?
129. Guy owns a lumber yard working directly with home builders and contractors. Margie, a contractor new to the area,
wants to set up a credit account with the lumber yard. She has a good history of successful and profitable projects. What
questions should Guy ask in evaluating the Margie’s credit status? Relate to the 5 C’s of credit.
130. Use product examples to illustrate elastic and inelastic demand.
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Answer Key
1. True
2. True
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52. b
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77. a
78. a
79. a
80. b
81. c
82. a
83. b
84. a
85. c
86. d
87. b
88. a
89. a
90. a
91. a
92. f
93. d
94. i
95. g
96. b
97. e
98. h
99. j
100. c
101. f
102. j
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103. c
104. g
105. e
106. h
107. a
108. i
109. d
110. d
111. a
112. i
113. f
114. b
115. h
116. k
117. g
118. c
119. e
120. Layla should use a skimming pricing strategy to go along with her perceived image. This strategy will have her set
prices at high levels for a limited time period, then reduce them to more competitive levels. This strategy uses the
assumption that because of her social status, customers will pay a higher price because they will view her hand-bags as
prestigious. She has little competition which will help to recover startup costs more quickly if enough customers like her
handbags.
Layla could also consider prestige pricing, assuming she has sufficient social status that would transfer to her hadbags. In
this case, she would convey through her pricing that her handbags are unique and high quality. However, considering her
town has not national department stores we can infer it is a smaller community that probably could not sustain the higher
price long-term.
121. Answers will vary from student to student. However, the following list contains items that could be discussed in their
answers.
∙ Analyze credit information on customers from credit bureaus.
∙ Use an aging schedule to forecast cash conversion rates.
∙ Use periodic billing statements.
∙ Establish adequate records and collection procedures.
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