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Exam 5: Competitive Advantage, Firm Performance, and Business Models

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Question 41

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Which of the following is an external performance metric?

A) return on revenue
B) fixed assets turnover
C) inventory turnover
D) total return to shareholders

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Question 42

Multiple Choice

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A defining characteristic of the subscription-based business model is that the

A) user pays for only the services he or she consumes.
B) user pays for access to a product or service whether he or she uses it during the payment term or not.
C) basic features of a product or service are provided free of charge, but the user must pay for premium services such as advanced features or add-ons.
D) initial product is often sold at a loss or given away for free in order to drive demand for complementary goods.

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Question 43

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The market capitalization of a public company is $5 billion. Each share of the company is traded at $200. What do you infer from this financial data?

A firm incurs $100 to manufacture an office table. It fixes the market price of the table as $250, and discounts the price to $200. However, the maximum a person is willing to pay for it is $180. What is the amount of total perceived consumer benefits in this scenario?

Both Saturn Technologies and Granite Inc. incur a cost of $200 to manufacture a single unit of a cell phone. However, Saturn Technologies charges a higher price than Granite Inc. does, but it still sells a higher number of phones. What does this imply?

Unlike the financial ratios based on accounting data, total return to shareholders is

A company's total asset base consists of its current assets plus plant, property, and equipment (PPE).

The three financial ratios that constitute return on revenue are Cost of goods sold/Revenue, Research & development expense/Revenue, and

Once a firm chooses a business model, it must stick with it for the life of the firm.

The efficient market hypothesis suggests that the market price of a firm's stock is an objective indicator of a firm's past, current, and expected future performance.

By selling a laptop at $1,000 for which consumers are willing to pay up to $1,200, a consumer electronics firm makes a profit of $400 per unit. In this scenario, the amount $600, that is ($1200 - $1000) + $400, is the

In the why, what, who, and how of business models framework, the why dimension asks "why does the business model create value?"

Accounting data focus mainly on tangible assets, which are no longer the most important. Elaborate on this statement.

Polygon sells its e-book readers at the cost price of $15 each. However, the company makes its profits when users have to download or buy books online. Which of the following business models is Polygon implementing?

________ denotes the dollar amount a consumer would attach to a good or service.

The management team for Volcanic Batteries came up with the following vision statement: "Volcanic Batteries will conscientiously track its financial performance to ensure profits for its investors, enhance its community through employment and supporting charities, and dispose of waste in a manner that will not harm the environment." This vision statement is most likely based on the

Generally speaking, a firm will create value if its return on invested capital (ROIC) is less than the cost of capital.

A firm has 30 million shares outstanding, and each share is traded at $100. Also, each shareholder gets a dividend of $2,000 annually. In this case, the market capitalization is

A firm will always see its stock price appreciate when it demonstrates measurable growth.

Zelda is a recent fashion graduate. She started her own apparel store with an investment of $300,000. In the first year she made a profit of $60,000. If she had taken up a job as a fashion editor for a magazine, she would have earned $50,000 as salary per year. Also, she could have invested her capital, $300,000, in treasury bonds and earned an interest of $12,000. Thus, the amount $62,000 ($50,000 + $12,000) would be Genevieve's