Archives: Quiz

It is okay for firms to create expectations that exceed the service the firm can or will offer if it will attract customers. Stakeholders of an organization include stockholders, customers and creditors, but not competitors. Answer: FALSE While vision and […]

A leveraged buyout occurs when a firm’s management and other private investors use borrowed funds to buy out the firm’s shareholders. The percentage-of-sales method should be used for projecting the cost of goods sold and the expense items in the […]

Market penetration, market development, and product development are intensive strategies. The controlling function of management is synonymous with strategy formulation. Answer: FALSE According to research, the most successful new product companies use a research and development strategy that ties internal […]

According to the Convention on the International Trade in Endangered Species (CITES), more than 25,000 elephants are killed each year for their ivory-even though international trade in ivory has been outlawed since 1989. Most producers today sell their goods directly […]

The purpose of organizing is to achieve coordinated effort by defining task and authority relationships. The SWOT matrix, if used appropriately, does not have any limitations. Answer: FALSE Segmenting industrial markets is generally simpler and easier than segmenting consumer markets. […]

Good intuitive judgment is always needed to determine appropriate weights and ratings in the input stage matrices. Four common approaches to determine R&D budget allocations are: 1. finance as many project proposals as possible; 2. use a percentage-of-sales method; 3. […]

Mass communication and high technology have led to highly individualized and distinct patterns of consumption in diverse cultures worldwide. With market segmentation, a firm can better operate with limited resources. Answer: TRUE One of the ways in which the Internet […]

Remaining solely domestic is an increasingly safer strategy for U.S. companies. Linear regression is based on the assumption that the future will be different from the past. Answer: FALSE Most quantitative evaluation criteria are geared to long-term objectives rather than […]

Sustainability refers to the extent that an organization’s operations and actions protect, mend, and preserve rather than harm or destroy the natural environment. Investors are now looking closely at Africa in the wake of low interest rates and slow growth […]

It is most effective to conduct strategy evaluation annually, at the end of the fiscal year. Business ethics can be defined as principles of conduct within organizations that guide decision making and behavior. Answer: TRUE The firm should pursue conservative […]

Formulation, implementation, and evaluation of strategy activities occur at three hierarchical levels in a large organization: corporate, divisional or strategic business unit, and functional. A low value of the dollar means lower exports and higher imports. Answer: FALSE All the […]

A clear mission statement describes the values and priorities of an organization. Corporate social policy should be designed and articulated during strategy formulation. Answer: TRUE The quantity or number of units of product that a firm must sell to break […]

For calendar 2013, companies in the S&P 500 are expected to pay at least $300 billion in dividends. When an acquisition or merger is not desired by both parties, it can be called a takeover or hostile takeover. Answer: TRUE […]

A chief executive officer is located in the divisional level of a large firm. The United States leads the world in promoting women and minorities into mid- and top-level managerial positions in business. Answer: TRUE In some foreign countries, paying […]

Regardless of the size of the organization, a certain amount of “management by wandering around” at all levels is essential to effective strategy evaluation. A conservative rule of thumb for measuring the value of a firm is to establish a […]

Recruitment, promotion, and mentoring are ways to alter an organization’s culture. Well-run organizations are able to completely avoid conflict. Answer: FALSE Cooperative arrangements and joint ventures are being used increasingly. Answer: TRUE Weaknesses of competitors in foreign lands are often […]

Taking corrective actions does not necessarily mean that existing strategies will be abandoned, or even that new strategies must be formulated. Product development is an appropriate strategy when an organization has successful products that are in the maturity stage of […]

Reengineering does not usually affect the organizational structure or chart, nor does it imply job loss or employee layoffs. The most common type of financial budget is the capital budget. Answer: FALSE According to Peter Drucker, developing a clear business […]

Objectives provide direction and allow for organizational synergy. A vision statement identifies the scope of a firm’s operations in product and market terms. Answer: FALSE Strategies clarify what can and cannot be done in pursuit of an organization’s objectives. Answer: […]

Believing it will make it easier for investors to compare firms across countries and make it easier to raise capital globally, most large accounting firms and multinational firms favor the switch to IFRS. A cost leadership strategy can be especially […]

According to Rumelt, consistency and feasibility are largely based on a firm’s internal assessment. A mission statement can sometimes be called a statement of philosophy. Answer: TRUE Too much emphasis on evaluating strategies may be expensive and counterproductive. Answer: TRUE […]

Conservative strategies in a SPACE Matrix most often include product development, market development, market penetration, and related diversification. Alternative strategies don’t come out of the blue; they are derived from the firm’s vision, mission, and objectives. Answer: TRUE While there […]

Joint ventures and partnerships between domestic and foreign firms are becoming the exception rather than the rule. The process of strategic management is facilitated immensely in firms that have an effective information system. Answer: TRUE Divestiture is selling all of […]

When performing projected financial analysis, the balance sheet should be prepared before the income statement. A mission statement is a declaration of an organization’s financial status. Answer: FALSE A cost/benefit analysis is an appraisal of the costs, benefits, and risks […]

It is possible to obtain insurance from the U.S. government ‘s OPIC to eliminate all risks associated with doing business internationally. Labor markets have become steadily more international with more and more countries around the world welcoming foreign investment and […]

The ISO 14000 family of standards concerns the extent to which a firm minimizes harmful effects on the environment caused by its activities and continually monitors and improves its own environmental performance. Divestiture would be an appropriate strategy when a […]

Strategic objectives include those associated with growth in revenues, growth in earnings, higher dividends, larger profit margins, and improved cash flow. A potential advantage to initiating, continuing, or expanding international operations is that foreign operations can absorb excess capacity, reduce […]

Annual objectives are especially important in strategy formulation. The Sarbanes-Oxley Act has eliminated the problem of firms inflating their financial projections, so stakeholders need not worry about the financial projections of different companies. Answer: FALSE ESOPs work well even in […]

U.S. firms are not being challenged in the computer industry. At Google the culture is very rigid, while in contrast the culture at Proctor & Gamble is very informal. Answer: FALSE Although bankruptcy can be an effective type of retrenchment […]

Since a combination strategy bears no risk, many organizations pursue a combination of two or more strategies simultaneously. Japan is providing incentives for its elderly to work until ages 65-75. Answer: TRUE Objectives should be measurable, challenging, reasonable, consistent, and […]

A mission statement should be broad in scope, since concrete specification could be the base for rallying opposition. One positive feature of QSPM is that it does not require intuitive judgments and educated assumptions. Answer: FALSE The trend toward an […]

Adequate and timely feedback is important to effective strategy evaluation. Strategic management is an attempt to organize qualitative and quantitative information in a way that allows effective decisions to be made under conditions of uncertainty. Answer: TRUE Strengths and weaknesses […]

Segmentation often reveals that large, random fluctuations in demand actually consist of several small, predictable, and manageable patterns. In practice, critical technology decisions are too often delegated to lower organizational levels or are made without an understanding of their strategic […]

Culture includes the set of shared values, beliefs, attitudes, customs, norms, personalities, heroes, and heroines that describe a firm. A primary reason why most domestic firms are engaging in global operations is that growth in demand for goods and services […]

One of the steps of the SWOT Matrix is to list the firm’s key external opportunities. Many organizations mistakenly spend more time and effort on the implementation of a plan, than on the formulation of the plan itself. Answer: FALSE […]

According to Drucker, the most important time for a company to develop mission and vision statements is when the company is experiencing financial difficulty. Contingency plans should be as simple as possible. Answer: TRUE A form of customer analysis is […]

Orphan drugs offer pharmaceutical companies no economic incentive for profitable development and distribution. Organizing is the cornerstone of effective strategy formulation. Answer: FALSE Selling a division or part of an organization is called divestiture. Answer: TRUE Like the United States, […]

The primary purpose of financial accounting is to A) supply information for external users’ decision making. B) provide data for internal users’ decision making. C) produce data for income taxes. D) create an audit report. E) organize the data for […]

In a bank reconciliation, company errors are adjustments to ________. Bank errors are adjustments to ________. A) balance per bank; balance per bank B) balance per company; balance per company C) balance per bank; balance per company D) balance per […]

Both stock dividends and stock splits involve a reduction in the par value of the stock. A trial balance is similar to a balance sheet in that it only includes balance sheet accounts. Answer: FALSE Assuming inflation, FIFO will result […]

Audit committees perform the internal audits of a company. Examples of assets include cash, inventory, and capital stock. Answer: FALSE[/cpmembership] Implicit interest is a form of interest expense that is not explicitly recognized in a loan agreement. Answer: TRUE A […]

Simple interest is calculated by multiplying an interest rate by an unchanging principal amount. Earnings quality is a well-defined and well-understood concept. Answer: FALSE The purchase of office equipment on account would increase assets and decrease stockholders’ equity. Answer: FALSE […]

Under the direct method, dividends from investments are included when calculating cash flows from operations. Failure to adjust for accrued revenue will understate stockholders’ equity. Answer: TRUE Historically, periodic inventory systems have been used for low value, high volume items, […]

U.S. Treasury obligations are interest-bearing notes, bonds, and bills issued by the U.S. federal government. LIFO results in a more accurate valuation of ending inventory on the balance sheet than does FIFO. Answer: FALSE Coupon rate and nominal interest rate […]

Payment of dividends is a financing activity. In substance, there is absolutely no difference between the 100% stock dividend and the two-for-one stock split. Answer: TRUE Depreciation is recomputed starting in the period that a change in estimate is known. […]

U.S. financial reporting follows the IASB framework for decision usefulness. Under the FIFO method, ending inventory is valued based on the oldest unit costs. Answer: FALSE The investing section of the Statement of Cash Flows includes the sale of fixed […]

Total accounts receivable are one of the denominators for the debt ratios. Cash received from customers is equal to sales plus the increase in accounts receivable. Answer: FALSE Once a company begins to make revaluation adjustments for plant assets, it […]

Retailers accept bank cards such as VISA and Master Card in order to get cash immediately rather than waiting for the customers to pay in due course. Under the direct method, depreciation is ignored when calculating cash flows from operations. […]

Negative numbers are never used in the journal or the ledger; the effect on the account is conveyed by the side on which the number appears. Another name for the P-E ratio is the earnings multiple. Answer: TRUE The major […]

The adjusting entry to record $650 of expired insurance would include a debit to Unearned Insurance. When computing an impairment loss for a tangible asset, the market price shall be the fair value unless no active market exists for the […]