2 A member of your management team says he has reduced the collection period fro

Question

2 A member of your management team says he has reduced the collection period from 73 days to 50 days. Did this hurt or help the company?

3 High technology industries like biotechnology and software companies always have higher ROIC’s and ROE’s than “low” technology firms like retail clothing, restaurants and theaters because they are, after all, high technology ?

True                        False

4 The following are “discovery skills”:

(A)   Risk management

(B)    Project management

(C)   Experimenting (D)   Porter’s 5 forces

(E)    Hedging

5 Strategy, as we discussed it, is most about (circle all that apply):

(A) Choosing what to focus on

(B)   Integrating the activities of the firm

(C)   Determining the optimal debt-to-equity ratio of the firm

(D)   Determining how to finance a new project

(E)   Hedging

6 Net income of an industry can be expected to be LOWER if the following are true (circle all that apply) :

(A)   The power of suppliers is low

(B)   The power of customers is high

(C)   There are low barriers to entry

(D)   Substitutes are not a threat

Explanation / Answer

2. It helps the company as collection period decreases cash flow of the company improves.

3. True high technology industry can charge high premium as they add more value to the final product.

4. C. Experimenting is one of the five discovery skill.

5. All the statements are correct about strategy.

6. B and C are correct. Higher customer power and low entry barriers can reduce net income of the industry.

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