Q&A Hero

Q: Russia and Eastern European countries fit in which stage of Rostow's five-stage model of economic growth? A) the traditional society B) drive to maturity C) preconditions for takeoff D) the age of mass consumption E) takeoff

Q: In the above figure, at the profit-maximizing rate of production for the perfectly competitive firm average total cost isA) $10.B) $3.C) $7. D) $70.

Q: A country has reached a level of economic development where the manufacturing of both semidurable and nondurable consumer goods has just begun. Also, the goods demanded relate to equipment and supplies to support manufacturing. In which stage of Rostow's five-stage model of economic growth does the country fit? A) the traditional society B) drive to maturity C) preconditions for takeoff D) takeoff E) the age of mass consumption

Q: Hensley Corporation uses breakeven analysis to study the effects of expansion projects it considers. Currently, the firm's plastic bag business segment has fixed operating costs of $120,000, while its unit price per carton is $1.20 and its variable unit cost is $0.60. The firm is considering a new bag machine and an automatic carton folder as modifications to its existing production lines. With the expansion, fixed costs would rise to $240,000, but variable cost would drop to $0.41 per unit. One key benefit is that Hensley can lower its wholesale price to its distributors to $1.05 per carton (i.e., its selling price), and this would likely more than double its market share, as it will become the lowest cost producer. What is the change in the operating breakeven volume with the proposed project? a. 100,000 units b. 175,000 units c. 75,000 units d. 200,000 units e. 0 units

Q: Refer to the above table. What are total costs at an output of 3 units?A) $90 B) $120 C) $150 D) $270

Q: Which country is designated as being in Stage 2 of Rostow's five-stage model of economic growth? A) Russia B) Germany C) South Korea D) Czech Republic E) Vietnam

Q: Compuvac Company has just completed its first pass forecast using the projected balance sheet method. The firm has determined that it needs $4 million in new debt which can be sold at par with a 10% annual coupon. Additionally, the firm will sell 500,000 shares of new common equity at $18.10 per share. Next year's expected dividend is $0.48 per share. The firm expects that taxes will be $160,000 less under the second pass than they were under the first pass based on a 40% tax rate. Given this information, what is the incremental change in AFN for Compuvac going from the first pass to the second pass? a. $240,000 b. $0 c. $480,000 d. $160,000 e. $640,000

Q: If you own 500 shares of preferred stock, how many regular votes would you get to cast at the next stockholders meeting?A) 500 B) 250 C) 1 D) 0

Q: A firm has the following balance sheet: Cash $ 20 Accounts payable $ 20 Accounts receivable 20 Notes payable 40 Inventory 20 Long-term debt 80 Fixed assets 180 Common stock 80 Retained earnings 20 Total assets $240 Total liabilities and equity $240 Sales for the year just ended were $400, and fixed assets were used at 80 percent of capacity, but its current assets were at optimal levels. Sales are expected to grow by 5 percent next year, the profit margin is 5 percent, and the dividend payout ratio is 60 percent. How much additional funds (AFN) will be needed? a. $4.6 b. −$6.4 (Surplus) c. $2.4 d. −$4.6 (Surplus) e. $0.8

Q: What is characteristic of Stage 2 of Rostow's five-stage model of economic growth? A) Industrial demand is mainly associated with natural resources extraction. B) The goods demanded relate to equipment and supplies to support manufacturing. C) The focus is more on low-cost manufacturing of a variety of consumer and some industrial goods. D) The focus is on design activities and the development of manufacturing techniques. E) Infrastructure development is a primary need.

Q: Economic profits are A) the same as accounting profits when firms do not own capital equipment. B) always greater than accounting profits. C) equal to accounting profits plus the implicit costs of the firm. D) whatever remains after all opportunity costs have been taken into account.

Q: In Stage 1 of Rostow's five-stage model of economic development, A) the economy is primarily driven by the production of services. B) the most important industrial demand relates to natural resources extraction. C) infrastructure development is a primary requirement in the economy. D) manufacturing of both semidurable and nondurable consumer goods has begun. E) the focus is on low-cost manufacturing of a variety of consumer and some industrial goods.

Q: You are the owner of a small business which has the following balance sheet: Current assets $ 5,000 Accounts payable $ 1,000 Net fixed assets 10,000 Accruals 1,000 Long-term debt 5,000 Common equity 8,000 Total assets $15,000 Total $15,000 Fixed and current assets are fully utilized, and the sales/assets and sales/spontaneous liabilities ratios will remain constant. Next year you expect sales to increase by 50 percent. You also expect to retain $2,000 of next year's earnings within the firm. What is next year's additional external funding requirement, i.e., what is your firm's AFN? a. No additional funds are required. b. $3,500 c. $4,500 d. $5,500 e. The answer depends on this year's sales level.

Q: Because the behavioral economics approach suggests many alternative behaviors that people might exhibit if they fail to behave as if they are rational, this approachA) often fails to provide clearly testable behavioral predictions. B) reproduces the same predictions as utility analysis.C) has an over reliance on the rationality assumption. D) ignores the possibility of bounded rationality.

Q: What is the first stage of Rostow's five-stage model of economic development? A) the traditional society B) drive to maturity C) preconditions for takeoff D) takeoff E) the age of mass consumption

Q: Texas Products Inc. has a division which makes burlap bags for the citrus industry. The unit has operating fixed costs of $10,000 per month, and it expects to sell 42,000 bags per month. If the variable cost per bag is $2.00, what price must the division charge in order to break even? a. $2.24 b. $2.47 c. $2.82 d. $3.15 e. $2.00

Q: The utility analysis theory assumes that consumers try toA) maximize their average utility.B) maximize their marginal utility.C) maximize the difference between total and marginal utility.D) maximize their total utility.

Q: What is perhaps the most significant environmental factor affecting the international market for industrial goods and services? A) the foreign exchange market B) political conditions C) the degree of industrialization D) the level of domestic competition E) global warming

Q: The Price Company will produce 55,000 widgets next year. Variable costs will equal 40 percent of sales, while operating fixed costs will total $110,000. At what price must each widget be sold for the company to achieve an EBIT of $95,000? a. $2.00 b. $4.45 c. $5.00 d. $5.37 e. $6.21

Q: When the consumer spends over 50% of her income on a good, demand will beA) elastic.B) unit-elastic. C) inelastic.D) elastic, unit-elastic or inelastic depending upon supply.

Q: Why do German and Japanese firms generally do better than U.S. firms when it comes to managing volatility? A) Their emphasis is on beating competitors. B) They value employees and stability more highly. C) They maintain limited product lines. D) They reduce prices faster and raise advertising expenditures during booms. E) They consider market share to be a strategic goal.

Q: Jill's Wigs Inc. had the following balance sheet last year: Cash $ 800 Accounts payable $ 350 Accounts receivable 450 Accrued wages 150 Inventory 950 Notes payable 2,000 Net fixed assets 34,000 Mortgage 26,500 Common stock 3,200 Retained earnings 4,000 Total assets $36,200 Total liabilities and equity $36,200 Jill has just invented a non-slip wig for men which she expects will cause sales to double, increasing after-tax net income to $1,000. She feels that she can handle the increase without adding any fixed assets. (1) Will Jill need any outside capital if she pays no dividends? (2) If so, how much? a. No; zero b. Yes; $7,700 c. Yes; $1,700 d. Yes; $700 e. No; there will be a $700 surplus.

Q: To correct for the social impact of pollution, the government should levy a per -unit taxA) that is the same for all polluters regardless of their locations or sizes.B) according to the economic damage of the pollution. C) according to the business activity of the polluter.D) only to those polluters that can afford to pay for the tax.

Q: What can be used as a measure to manage volatility in industrial demand? A) maintaining a narrow product line B) reducing prices during booms C) reducing advertising expenditures during booms D) focusing on market share as a strategic goal E) avoiding investment in foreign high-yield financial instruments

Q: Which of the following statements is correct? a. Depreciation is included in the estimate of cash flows (Cash flow = Net income + Depreciation), so depreciation is set forth on a separate line in the cash budget. b. If cash inflows and cash outflows occur on a regular basis, such as the situation where inflows from collections occur in equal amounts each day and most payments are made regularly on the 10th of each month, then it is not necessary to use a daily cash budget. A cash budget prepared at the end of the month will suffice. c. Cash budgets are more important for fast food retailers, such as McDonald's, which deal primarily with cash than for manufacturers, such as General Motors, that generally sell on credit. d. When constructing a cash budget, it probably is easier to forecast cash inflows than cash outflows. e. All of the above statements are false.

Q: Since Social Security is a pay-as-you-go program, the funds for the people retiring todayA) come from those of us working today and in the future.B) come from the Federal Reserve. C) come from import taxes.D) come from foreign sales of gold.

Q: Derived demand can be defined as demand that is A) independent of price. B) independent of consumer wants and needs. C) dependent on another source. D) highly volatile. E) highly responsive to factors other than price.

Q: Which of the following statements about cash management is false? a. Depreciation expense does not appear explicitly on the cash budget, but its tax effects are included. b. If cash flows are not uniform during the month, then weekly or perhaps daily cash budgets should be prepared rather than monthly budgets. c. Compensating balance requirements do not affect a firm's target cash balance. d. Cash management involves costs, and it is important to analyze whether the benefits received outweigh the costs included. e. The cash budget is the foundation of good cash management.

Q: The supply curve of labor to a monopsonist is A) upward sloping. B) downward sloping because of the law of diminishing marginal returns. C) downward sloping, but not because of the law of diminishing marginal returns. D) horizontal.

Q: For managers selling capital equipment and big-ticket industrial services, understanding the concept of ________ is absolutely fundamental to their success. A) availability heuristic B) bank effect C) Baskerville effect D) derived demand E) catapult demand

Q: Which of the following statements is correct? a. The first pass using the projected balance sheet method determines the financing feedback effects and determines how much in additional funds are needed. The second pass completes the cycle, identifies the full financing need, and eliminates further feedback effects. b. Interest expense on additional new debt is the only income statement account affected by financing feedback, and dividends payable to new common stock is the only balance sheet account affected. c. The projected balance sheet method is useful for determining additional funds needed, however, it cannot be used in evaluating dividend policy and capital structure decisions. d. One reason a firm's managers may choose to meet additional funds needed requirements through common stock is that it involves no financing feedback effects. Since no new debt is used, interest expense will be considered fully in the first pass, the income statement will remain unchanged, and no second pass is needed. e. If new debt and new stock are used to meet new financing needs, net income will decrease from the first pass to the second pass even though taxes decrease. In addition, if dividends are to be paid on new stock, this will further decrease the amount of retained earnings available for financing needs.

Q: For a firm that uses land, labor and capital as inputs, how should the inputs be utilized in order to minimize total costs?

Q: What factor increases the volatility in demand in industrial markets? A) Professional buyers in the industrial market tend to act in concert. B) The demand for industrial goods is independent of changes in economic development. C) Small, noncyclical swings in demand are inherent in industrial markets. D) Experienced purchasers tend to make buying decisions independently. E) The demand for industrial goods is highly inelastic.

Q: Other things held constant, which of the following statements is correct if a firm currently is operating at its financial breakeven point? a. EBIT must be greater than zero. b. EBIT would equal zero if the firm is financed only with common stock (i.e., there is no debt or preferred stock). c. EBIT would equal zero, hence EPS would be less than zero, if the firm has preferred stock but no debt. d. EPS would equal zero only if the firm is financed with some amount of debt. e. The firm would not be considered to have much financial risk, especially when compared to a firm that operates well above its financial breakeven point.

Q: The marginal physical product (MPP) is calculated byA) dividing total physical product by labor.B) dividing the change in total physical product by the change in the input.C) dividing the change in total cost by the change in labor.D) the difference between the output of skilled and unskilled workers.

Q: What is a reason for marketing industrial goods abroad that does NOT necessarily apply to consumer goods? A) bypassing import tariffs B) avoiding sales tax C) reducing the volatility of demand D) acquiring ISO certification E) acquiring ACSI certification

Q: If a firm's degree of total leverage (DTL) is 8.0, which of the following must be correct? a. The firm must have fixed operating costs. b. The firm must have fixed financial costs. c. The firm must have both fixed operating costs and fixed financial costs. d. The firm must have some fixed costs, but not enough information is given to determine whether the fixed costs are operating, financial, or both. e. With the information given, we cannot tell whether the firm has any fixed costs (either operating or financial) at all.

Q: The hypothesis that regulators eventually are controlled by the regulated firms and their special interests is theA) share-the-gains, share-the-pains hypothesis. B) capture hypothesis.C) public interest theory.D) control-group hypothesis.

Q: What statement is true in industrial markets? A) Demand is nonvolatile by nature. B) Markets are unaffected by derived demand. C) Industrial sellers tend to have small numbers of customers upon which they are more dependent. D) Sales of industrial goods are stable and do not fluctuate. E) Professional buyers tend to undertake dissimilar investment actions to achieve the same goal.

Q: The degree of financial leverage has which of the following characteristics? a. The closer the firm is operating to its financial breakeven point, the smaller the DFL. b. Other things held constant, if a firm has fixed financial costs, such as interest, a change in EBIT will result in an equivalent change in EPS. c. For a particular firm, the DFL is not a fixed number⎯its value depends on the level of operations and the fixed financial costs associated with those operations. d. The DFL relates the change in EBIT to the change in sales. e. If a firm has common stock, it is impossible for its DFL to equal 1.0.

Q: Negative market feedback refers to a tendency forA) one or two firms in an oligopolistic industry to respond to price decreases by initiating efforts to engage in price leadership.B) a particular product to fall out of favor with additional consumers because other consumers have stopped purchasing the product.C) the dominant firm in an oligopolistic industry to react to competing firmsʹ price increases by decreasing the price of its own product.D) price wars to break out in oligopolistic industries in which firms produce products possessing characteristics that make them prone to network effects.

Q: Industrial markets differ from consumer markets in that A) the demand for industrial goods is more volatile than the demand for consumer goods. B) the market for industrial goods is insignificant in comparison to the market for consumer goods. C) industrial goods are marketed domestically whereas consumer goods are marketed internationally. D) industrial products are always more expensive than consumer products. E) industrial products use the same level of technology for all products making it appropriate for all countries whereas consumer goods need to be customized for each market.

Q: The degree of financial leverage for Aries Inc. is 3.0, and the degree of financial leverage for Common Capital Corporation is 6.2. According to this information, which firm is considered to have greater overall (total) risk? a. Aries Inc. b. Common Capital Corporation. c. The degree of financial leverage is a measure of financial risk, so the only conclusion that can be made with the information given is that Common Capital Corporation has greater financial risk than Aries Inc.⎯ we cannot tell which firm has greater total risk. d. To determine which firm has the greater total risk, we need to know the financial breakeven point of each firm. e. None of the above is a correct answer.

Q: An information product is a product for whichA) the first item is produced inexpensively but additional units are more costly to produce.B) the first unit is very costly to make but additional units are less costly to produce.C) the marginal cost first falls and then rises but the average total cost rises throughout its range.D) the average fixed cost first falls and then rises, but the average total cost falls throughout its range.

Q: Mai is a new international sales representative for an industrial supply company that is focusing heavily on technology as a selling feature. She will learn that this strategy A) will be a key selling feature in all markets. B) will have the most impact in developing countries. C) may not be appropriate for all countries. D) will not make a big difference in the global market. E) can be easily overcome by competitors.

Q: The degree of operating leverage has which of the following characteristics? a. The closer the firm is operating to breakeven quantity, the smaller the DOL. b. A change in quantity demanded will produce the same percentage change in EBIT as an identical change in price per unit of output, other things held constant. c. The DOL is not a fixed number for a given firm, but will depend upon the time zero values of the economic variables Q (Quantity), P (Price), and V (Volume). d. The DOL relates the change in net income to the change in net operating income. e. If the firm has no debt, the DOL will equal 1.

Q: The distinguishing of products by brand name, color, and other attributesA) is known as interdependence. B) is known as product differentiation.C) leads to many firms in the market. D) leads to collusion.

Q: Relationship marketing shifts the focus away from price to service and long-term benefits.

Q: Which of the following statements is correct? a. Any forecast of financial requirements involves determining how much money the firm will need and is obtained by adding together increases in assets and spontaneous liabilities and subtracting operating income. b. The projected balance sheet method of forecasting financial needs requires only a forecast of the firm's balance sheet. Although a forecasted income statement helps clarify the financing needs, it is not essential to the balance sheet method. c. Because dividends are paid after taxes from retained earnings, dividends are not included in the projected balance sheet method of forecasting. d. The projected balance sheet method forces recognition of the fact that new financing creates additional financial obligations. For instance, new financing can increase expenses which can actually decrease taxes but increase the projected financial need. e. Financing feedback describes the effect on the firm's stock price of the announcement that the firm will sell new equity or debt to raise needed capital.

Q: The monopolist should NEVER produce in theA) elastic segment of its demand curve because it can increase total revenue and reduce total cost by lowering price.B) inelastic segment of its demand curve because further lowering of the price reduces total revenue.C) range of output for which the price elasticity of demand is infinity.D) range of output for which there is a price elasticity exceeding one.

Q: The sales of industrial goods are driven by the buyer's need to make profits.

Q: Holding other things constant, the additional funds required for financing the firm's operations would be reduced with an increase in the firm's a. Dividend payout ratio. b. Profit margin. c. Cost of external funds. d. Expected growth rate in sales. e. Tax rate.

Q: In difficult economic and political circumstances or otherwise, online trade shows are a more than adequate substitute for physical trade shows or trade fairs.

Q: If an industryʹs long-run per-unit costs are constant as its output increases thenA) the firmʹs long-run economic profits must be greater than zero. B) the firm is most likely a decreasing-cost industry.C) the firm is most likely an increasing -cost industry. D) the firm is most likely a constant-cost industry.

Q: Considering each action independently and holding other things constant, which of the following actions would reduce the firm's need for additional capital? a. An increase in the dividend payout ratio. b. A decrease in the profit margin. c. A decrease in the days sales outstanding. d. An increase in expected sales growth. e. A decrease in the accrual accounts (accrued wages and taxes).

Q: In the above figure, at the profit-maximizing rate of production for the perfectly competitive firm total cost isA) $100. B) $70. C) $30. D) $130.

Q: Trade shows serve a much more important role in the U.S. than in other countries.

Q: Which of the following is (are) typically part of the cash budget? a. Payments lag. b. Payment for plant construction. c. Cumulative cash. d. All of the above. e. Only answers a and c above.

Q: Refer to the above table. What are total variable costs at an output of 3 units?A) $90 B) $120 C) $150 D) $270

Q: A company website is the most important vehicle for selling industrial products, reaching prospective B2B customers, and marketing in most countries.

Q: The financial breakeven point for a firm is defined as the level of ____ that produces ____ equal to zero. a. sales; EBIT. b. sales; gross profit. c. EPS; sales. d. gross profit; EBIT. e. EBIT; EPS.

Q: The three primary sources of corporate funds are A) banks, friends, and family. B) government, other corporations, and the central bank. C) investment banks, brokerages, and insurance companies. D) stocks, bonds, and reinvestment of profits.

Q: Communism is the most serious threat to the continued expansion of international services trade.

Q: Which of the following is a key determinant of financial leverage? a. Level of debt. b. Technology. c. Labor costs. d. Amount of fixed assets used by the firm. e. Variable cost of goods sold.

Q: In considering economic profit in a market economy, it is correct to say thatA) there should never be any economic profit.B) economic profit will only occur, even in the short run, as a result of imperfect competition. C) economic profit performs an important function in allocating resources to their most highly valued uses.D) economic profit tends to reduce the production efficiency of the economy, leading to wasted resources.

Q: A manufacturer who does not provide after-sales services and support could also be forgoing the opportunity of participating in a lucrative aftermarket.

Q: The degree of financial leverage for ABC Inc. is 2.5, and the degree of financial leverage for XYZ Corporation is 1.5. According to this information, which firm is considered to have greater financial risk? a. ABC Inc. b. XYZ Corporation. c. The degree of financial leverage is not a measure of financial risk, so it is not possible to tell which firm has the greater financial risk given the above information. d. To determine which firm has the greater financial risk, we need to know the operating income (NOI or EBIT) of each firm. XYZ Corporation would have less financial risk if its operating income is at least twice that of ABC Inc. e. None of the above is a correct answer.

Q: For international users of heavy construction equipment, the manufacturer's country of origin is of primary importance in purchasing construction equipment.

Q: The fact that the price of diamonds is higher than the price of waterA) cannot be explained by behavioral economics or consumer choice theory.B) is an outcome of irrational behavior in consumer choice theory.C) can be explained only by behavioral economics but not by consumer choice theory.D) can be explained as the outcome of a consumer optimum in consumer choice theory.

Q: The degree of operating leverage for ABC Inc. is 3.5, and the degree of operating leverage for XYZ Corporation is 7.0. According to this information, which firm is considered to have greater business risk? a. ABC Inc. b. XYZ Corporation. c. The degree of operating leverage is not a measure of business risk, so it is not possible to tell which firm has the greater business risk given the above information. d. To determine which firm has the greater business risk, we need to know the operating income (NOI or EBIT) of each firm. XYZ Corporation would have less business risk if its operating income is at least twice that of ABC Inc. e. None of the above is a correct answer.

Q: Utility analysis is the analysis ofA) the formation of tastes and preferences.B) the differences of tastes and preferences across individuals.C) the consumption decisions of people based on utility maximization.D) how consumers determine the utility they receive from consumption.

Q: For many industrial products, the revenue from associated services exceeds the revenue from the products themselves.

Q: Which of the following is a key determinant of operating leverage? a. Level of debt. b. Physical location of production facilities. c. Cost of debt. d. Technology. e. Capital structure.

Q: To receive ISO 9000 certification, a company requests a certifying body to conduct a registration assessment.

Q: When the consumer spends a large portion of her income on a good, demand will beA) elastic.B) unit-elastic. C) inelastic.D) elastic, unit-elastic or inelastic depending upon supply.

Q: Assume a portion of a firm's long-term funds includes either debt or preferred stock. Which of the following statements is correct? a. The firm must possess operating leverage, which means that a change in net income will result in a greater percentage change in earnings before interest and taxes (EBIT). b. The firm has financial leverage, which means that a change in sales will result in a greater percentage change in EBIT. c. The firm has financial leverage, which means that a change in EBIT will result in a greater percentage change in earnings per share (EPS). d. The firm doesn't have leverage, because leverage is created through the use of common equity financing only. e. None of the above is a correct answer.

Q: The government is considering levying a tax on the pollution generated from two electric power plants (Plant A and Plant B). Plant A is located in a city with a high density of population, and Plant B is located in the rural area with a low density of population. The government shouldA) levy the same tax per unit of pollution on both plants.B) levy a higher tax per unit of pollution on Plant A because of its higher economic damage. C) levy a higher tax per unit of pollution on Plant B because of its lower economic damage. D) tax only Plant A but not Plant B because Plant B generates less revenue.

Q: The ISO 9000 certification guarantees that each product or service produced by a company is of the highest quality.

Q: Which of the following statements is correct? a. One of the key steps in the development of pro forma financial statements is to identify those assets and liabilities which increase spontaneously with net income. b. The first, and most critical, step in constructing a set of pro forma financial statements is establishing the sales forecast. c. Pro forma financial statements as discussed in the text are used primarily to assess a firm's historical performance. d. All else equal, if a firm operates at full capacity, the greater its payout ratio, the less additional funds that will be needed for a particular growth in sales. e. The projected balance sheet forecasting method produces accurate results when fixed assets are lumpy and when economies of scale are present.

Q: The U.S. Department of Commerce has mandated that all U.S. government purchases use the metric system.