In the long run, investors’ returns on a company’s equity should be lower than their returns on bonds issued by the same company.
False
According to the cost-of-production method, profit equals the monetary value of the goods/services sold during a time period (revenues) minus the monetary value of resources consumed to produce these goods/services (expenses).
False
When a company distributes its profits of the year 2021 to its owners at the end of the year, then the company’s net value (according to the Balance Sheet) at the end of 2021 equals its net value at the beginning of the year.
Correct
When a taxi company buys a new car by lending money then this transaction leads to a lower ROI because capital increases while profits do not change (they only change once the taxi gets used)
Correct
When a taxi company buys a new taxi for 40,000 EUR then this transaction is a capital expenditure.
Correct
If an investment today generates a stream of positive cash flows in the future, then the internal rate of return of this investment is the discount rate for which the present value of the generated future cash flows equals today’s investment.
Correct
When a company pays back a loan, then EBIT increases
False
When a company pays back a loan, then Free Cashflow increases
False
Red Bull is an example of a differentiation strategy because the brand sets the product apart from the competition.
Correct
If cash flow generated by cash cows is used to finance a question mark then this is an example of using external sources of finance (external capital market)
False
A firm’s top managers are likely to prefer internal sources of finance to raising new equity because internal sources of finance give them a high level of discretion, while their investment decisions are tightly controlled by owners when raising new equity.
Correct
In the BCG portfolio a cash cow generates cash flow that can be used to finance question marks or growth of stars
Correct
Decisions on the 4P’s can be used to differentiate a given product from competitors’ products
Correct
The money spent for a marketing campaign is cash outflow but no expense.
False
From a financial perspective, a marketing campaign can be seen as an investment that aims at generating higher revenues in the future
Correct
When a company invests money to build up a brand then such investment always decreases overall profit since brand name capital is an intangible asset that cannot be listed in the Balance Sheet.
False
From a P&L-perspective employees cause expenses (salary), but with their expertise and knowhow they help to generate revenues.
Correct
When a company borrows money to buy a new car, then both sides of the Balance Sheet (assets and claims) increase.
Correct
When the price of a product is increased then it can be expected that less units of the product will be sold but revenues may still increase.
Correct
When a company buys machinery from its cash reserves then this does not change the overall monetary value of assets in the Balance Sheet.
Correct
When a company pays the interest for a bank loan, then this is no expense because there is no ‘resource consumption”.
False
Paying salary to employees is an expense.
Correct
When a company pays back a loan by using its cash reserves, then this is an expense because cash money is consumed.
False
The SWOT analysis combines the market-based view with the resource-based view.
Correct
With its Model T, the Ford Motor Company pursued a differentiation strategy, since the production process differed significantly from existing production processes for cars at that time.
False
The market-based view deals with how competitive advantage is achieved by taking advantage of imperfect factor markets.
False
Goods sold on digital platforms can only provide demand-side economies of scale, if the costs of reproduction are close to zero.
False
High complexity of services by tailoring services to the variety of customer preferences, is a typical characteristic of cost leadership strategies.
False
If a company’s core competence is marketing, then this indicates a cost leadership strategy.
False
Recombinant Innovation means that a business model combines innovative products.
False
When managers resist technological change then this is called intrapreneurship.
False
BS Final 2021
Red Bull is an example of a differentiation strategy because the brand sets the product apart from the competition.
Correct
In the BCG Portfolio a cash cow generates cash flow that can be used to finance question marks or growth of stars
Correct
If cash flow generated by cash cows is used to finance a question mark then this is an example of using external sources of finance (external capital market)
False
A firm’s top managers are likely to prefer internal sources of finance to raising new equity because internal sources of finance give them a high level of discretion while their investment decisions are tightly controlled by owners when raising new equity.
Correct
Within the 4 P’s framework, the choice of sales channels is a promotion decision
False
From a financial perspective, a marketing campaign can be seen as an investment that aims at generating higher revenues in the future
Correct
Decisions on the 4P’s can be used to differentiate a given product from competitors’ products
Correct
The money spent for a marketing campaign is cash outflow but no expense.
False
If a company’s core competence is marketing then this indicates a cost leadership strategy.
False
High complexity of services by tailoring services to the variety of customer preferences, is a typical characteristic of cost leadership strategies.
False
The question of which processes a company should focus on and which processes should be outsourced is a typical question asked in “value chain analysis”.
Correct
In a knowledge-based society, human resources tend to be easily replaced.
False
With its Model T, the Ford Motor Company pursued a differentiation strategy, since the production process differed significantly from existing production processes for cars at that time.
False
Edith Penrose is one of the leading scientists when it comes to the Market-based view.
False
When companies propagate a purpose in their employer branding activities, then this addresses people’s need for self-actualization in Maslovs hierachy of needs.
Correct
When a company considers selling its products online, then this is a decision on “Place” in the “4Ps concept”.
Correct
The supply chain can be defined as the collection of production processes performed within a company.
False
When Red Bull decides on whether product distribution should be organized “in-house” or organized by collaboration with a partner firm, then this is a make-or-buy decision.
Correct
From a production perspective, efficiency means that no inputs are wasted.
According to the cost-of-production method, profit equals the monetary value of the goods/services sold during a time period (revenues) minus the monetary value of resources consumed to produce these goods/services (expenses)
False
In the long run, investors’ returns on a company’s equity should be lower than their returns on bonds issued by the same company.
False
When a company distributes its profits of the year 2021 to its owners at the end of the year, then the company’s net value (according to the Balance Sheet) at the end of 2021 equals its net value at the beginning of the year.
When a company pays the interest for a bank loan, then this is no expense because there is no “resource consumption”.
False
When a company buys machinery from its cash reserves then this does not change the overall monetary value of assets in the Balance Sheet.
Correct
When a company pays back a loan by using its cash reserves, then this is an expense because cash money is consumed.
False
Paying salary to employees is an expense
Correct
When a company invests money to build up a brand then such investment always decreases overall profit in the long run, since brand name capital is an intangible asset that cannot be listed in the Balance Sheet.
Bureaucracy is characterized by centralized authority, rules and defined procedures
True
From a P&L-perspective employees cause expenses (salary), but with their expertise and knowhow they help to generate revenues.
True
When a taxi company buys a new car then this transaction leads to a lower ROI because capital increases while profits do not change (they only change once the taxi gets used)
Correct
When a taxi company buys a new taxi for 40,000 EUR then this transaction is a capital expenditure.
Correct
Assume that you make an investment of 1,000 EUR today, which provides you with a return of 10 EUR one year later, and again 10 EUR two years later; three years later you will get back the initial investment of 1,000 EUR plus 15 EUR. For this investment, the internal rate of return is calculated by solving the following equation for r.
−1,000+1+r10+(1+r)210(1+r)31,015=0
False
When a taxi company sells an unused car above its book value, then ROI increases.
Correct
When a car producing company sells cars in distribution centers owned by the company, then this is franchising.
False
The SWOT analysis combines the market-based view with the resource-based view
Correct
From a strategic perspective, it is a common rule for make-or-buy decisions to outsource only activities that are not essential for establishing the company’s USP.
Correct
Supply Chain Management includes make-or-buy decisions.
Correct
A profit margin of 0.3 means that one Euro of revenue generates on average 3 cents of profit
If it is possible for a company to invest cash money at 5% per year and to lend money at the same interest rate of 5%, then the value of a cash flow of 1,000 Euro one year in the future seen from the viewpoint of today is 1,000/1.05.
Correct
When a company pays back a loan, then gearing goes down
Correct
When a company pays back a loan, then Free Cash Flow increases
False
When a company pays back a loan, then Cash Flow from financing decreases
Correct
When a company pays back a loan, then EBIT increases
False
Herzberg’s theory explains the importance of extrinsic Motivation
50. False
From a Taylorism perspective, management deals with the optimal division of the production process into individual tasks, in order to economize on the benefits of specialization.
Correct
The “Hawthorne effect” shows the importance of incentives in companies
False
The value of a company can be determined by calculating the present value of the future cash flows it generates for the owners.
Correct
An investment that involves lower risk should have a higher internal rate of return.
If an investment made today generates a positive NPV then this means that the value of the future cash flow stream generated by this investment is higher than the initial investment.
Correct
When the price of a product is increased then it can be expected that less units of the product will be sold but revenues may still increase.
Correct
Taylorism combined with assembly line production has been known as Fordism.
Correct
When a company invests money to build up a brand then such investment only makes economic sense if the company is able to get the invested money back through higher revenues.
Correct
In Herzberg’s theory, recognition, responsibility, autonomy, and challenging work are main motivators.
Correct
According to Michael Porter’s value chain, a process is a bundle of interrelated activities that create value for the customer
Correct
Corporate Governance refers to the rules and mechanisms of the generation and appropriation of value created by companies.
Correct
A production function associates produced output with the cost necessary to produce this output.
False
Piece rate bay is an example for extrinsic Motivation
Cost leadership means that a company produces at higher costs than its competitors
False
Core competencies are skills that enable a company to deliver a fundamental customer benefit
Correct
Red Bull is an example of a differentiation strategy because the brand sets the product apart from the competition
Correct
A strong brand can be interpreted as a market barrier.
Correct
Assume that the sales of smartphones worldwide in year t is 500 billon USD, while in t-1 it was 450 billion USD. Moreover assume that Samsung and Apple are the two largest players in the market in terms of smartphone sales. Samsung’s smartphone sales in year t are 100 billion USD, while Apple’s smartphone sales in year t are 120 billion USD
The overall market growth for smartphones from t-1 to t is given by (500-450)/450=50/450 = 11%
Correct
Samsung’s market share in year t is 100/500 = 0.2 = 20%
Correct
A firm’s top managers are likely to prefer internal sources of finance to raising new equity because internal sources of finance give them a high level of discretion while their investment decisions is tightly controlled by owners when raising new equity.
Correct
In the BCG portfolio a question mark is characterized by low market growth and high relative market share
False
In the BCG portfolio a cash cow generates Cash Flow which can be used to finance question marks or growth of stars
Correct
If Cash flow generated by cash cows is used to finance a question mark then this is an example of using external sources of finance (external capital market)
From a Taylorism perspective, management deals with the optimal division of the production process into individual tasks, in order to economize on the benefits of specialization.
Owners of bonds tend to bear higher risk than owners of equity
False
When a taxi company buys a new car then this transaction leads to a lower ROI because capital increases while profits do not change (they only change once the taxi gets used)
Correct
When a taxi company buys a new taxi for 40,000 EUR then this transaction is an expense.
False
When a taxi company sells an unused car above its (book) value in the Balance Sheet, then ROI increases.
Correct
When a taxi company buys a new taxi for 40,000 EUR then this transaction is a capital expenditure.
Correct
According to the cost-of-production method, profit equals the monetary value of the goods/services sold during a time period (revenues) minus the monetary value of resources consumed to produce these goods/services (expenses)
False
When a company distributes its profits of the year 2020 to its owners at the end of the year, then the company’s net value (according to Balance Sheet) at the end of 2020 equals its value at the beginning of the year.
Correct
When a company borrows money to buy a new car, then both sides of the Balance Sheet (assets and claims) increase.
Correct
On average, investors’ returns on a company’s equity should be lower than their returns on bonds issued by the same company.
If you invest 1,000 EUR in 2020 and receive 10 EUR in 2021 and also in 2022 as interest, while you get back the initial investment of 1,000 plus 15 EUR interest in 2023, then the internal rate of return is calculated by solving the following equation for r:
−1,000+1+r10+(1+r)210+(1+r)310+(1+r)41,015
False
If a taxi company owns an apartment which earns a monthly rent, then the value of this apartment is not part of operating assets as defined in the formula for ROCE
Correct
If it is possible for a company to invest cash money at 5% per year and to lend money at the same interest rate of 5%, then the value of a cash flow of 1,000 Euro one year in the future seen from the viewpoint of today is 1,000/1.05.
Correct
A profit margin of 0.3 means that one Euro of revenue generates on average 3 cents of profit
If an investment made today generates a positive NPV then this means that the value of the future cash flow stream generated by this investment is higher than the initial investment.
From a production perspective, efficiency means that no inputs are wasted
Correct
The supply chain can be defined as the collection of production processes performed within a company
False
When Red Bull decides on whether product distribution should be organized “in-house” or organized by collaboration with a partner firm, then this is a make-or-buy decision.
Netflix and similar internet entertainment services created a new business that displaced the business of video rental shops and thus they can be seen as an example of creative distruction.
Correct
Recombinant Innovation means that business models combine innovative products.
False
When managers resist technological change then this is called intrapreneurship.
False
Venture Capital is capital that is provided to corporations by banks.
When a company invests money to build up a brand than such investment always decreases profit in the long run, since brand name capital is an intangible asset that cannot be listed in the Balance Sheet.
False
BS Final 2019
Which statements about “Customer Perceptive” are correct?
The money spent for a marketing campaign is cash outflow but no expense.
False
Within the 4P´s framework the choice of sales channels is a promotion decision?
False
From a financial perspective a marketing campaign can be seen as an investment that aims generating higher revenues in the future.
Correct
Decisions on 4P´s can be used to differentiate a given product as part of quality leadership
Correct
Strategic Perspective and customer perspective
assume that the sales of smartphones worldwide in year t is 500 billion USD, while in t-1 it was 450 billion USD. Moreover, assume that Samsung and Apple are the two largest players in the market in terms of smartphone sales. Samsung´s smartphone sales in year t are 100 billion USD, while Apple´s smartphone sales in year t are 120 billion USD. Which answers are correct?
The overall market growth for smartphones from t+1 to t is given by 500-450/450=50/450=11%
When an investment of 100.000 EUR generates a positive NPV then this means that the value of the future cash flow stream generated by this investment is higher than the initial investment.
Correct
Which statements on the “Production Perspective” is/are correct?
The supply chain can be defined as the collection of production processes performed within a company
False
When Red Bull decides on whether product distribution should be organized “in-house” or organized by collaboration with a partner firm, then this is a make or buy decision
Correct
From a production perspective, efficiency means that no inputs are wasted
If cash Flow generated by cash cows is used to finance question marks, then this is a example of using external sources of investment (external capital market)
False
A firm´s top managers are likely to prefer internal sources of finance to raising new equity because internal sources of finance give them high level of discretion while their investment decision is tightly controlled by owners when raising new equity.
True
In the BCG portfolio a question mark generates enough cash flow to support itself and to finance growth
False
In the BCG portfolio cash cow generates Cash Flow which can be used to finance question marks or growth of stars.
When a company distributes its profits of the year 2018 to its owners at the end of the year, then the company´s net value (according to Balance Sheet) at the end of 2018 equals it´s value at the beginning of the year
Correct
When a company uses debt to buy a new car, then then both sides of the Balance Sheet (assets and claims) increase.
Correct
When a taxi company sells an unused car above its (book)value in the Balance Sheet than the ROI increases
Correct
Long term debt means that such capital only creates profit in the long term
Owners of bonds tend to bear higher risk than owners of equity
False
On average investors returns on a company’s equity should be lower than then their returns on bonds issued by the same company.
False
When it is possible for a company to invest cash money at 5% per year and to lend money at the same interest rate of 5% then the value of cash flow of 1.000 Euro one year in the future from the viewpoint of today is 1000/1.05.
Correct
The fact that balance sheets do not contain most intangible assets is one main reason why the market capitalization of companies is very often higher than their net value=equity according to the Balance Sheet.
Correct
Which statement is/are correct?
When a company invests money to build up a brand than such investments always decrease profit since brand name capital is an intangible asset that cannot be listed in the Balance Sheet
False
When the price of a product is increased then it can be expected that less units of the product will be sold but revenues may still increase
From a Taylorism perspective, management deals with the optimal division of the production process into individual tasks, in order to economize on the benefits of specialization
Correct
Which statement/s on the “Financial Perspective” is/are correct? When a company pays back a loan then…
If you invest 1000 EUR in 2019 and receive 10 EU in 2020 and also 2021 as interest, while you get back the initial investment of 1000 plus 15 EUR interest in 2022, then the internal rate of return is calculated by solving the following equation for r: -1000+10/(1+r)+10/(1+r)^2+15/(1+r)^3=0
If r is the interest rate then today´s value of x Euro to be received in n years in the future is: x/(1+r)^n.
Correct
If you calculate the net present value of an investment´s cash flow stream using a discount factor higher than the internal rate of return of this investment then this net present value will be positive.