Multiple Choice Answers

(TCO 9) Which one of the following is a true statement about incremental analysis?
It is another name for capital budgeting.
It is the same as CVP analysis.
It is used primarily for long-term planning.
It focuses on decisions that involve a choice among alternative courses of action.

(TCO 9) Which statement is true about relevant costs in incremental analysis?
All costs are relevant if they change between alternatives.
Only fixed costs are relevant.
Only variable costs are relevant.
Relevant costs should be ignored.

(TCO 9) What role does a trade-in allowance on old equipment play in a decision to retain or replace equipment?
It is relevant because it increases the cost of the new equipment.
It is not relevant because it reduces the cost of the old equipment.
It is not relevant to the decision because it does not impact the cost of the new equipment.
It is relevant because it reduces the cost of the new equipment.

(TCO 8) Most of the capital budgeting methods use __________
accrual accounting numbers.
cash flow numbers.
net income.
accrual accounting revenues.

(TCO 8) Capital budgeting is the process __________
used in sell or process-further decisions.
of determining how much capital stock to issue.
of making capital-expenditure decisions.
of eliminating unprofitable product lines.

(TCO 8) If a payback period for a project is greater than its expected useful life, the __________
project will always be profitable.
entire initial investment will not be recovered.
project would only be acceptable if the company’s cost of capital was low.
project’s return will always exceed the company’s cost of capital.

(TCO 8) Intangible benefits in capital budgeting __________
should be ignored because they are difficult to determine.
include increased quality or employee loyalty.
are not considered because they are usually not relevant to the decision.
have a rate of return in excess of the company’s cost of capital.

(TCO 8) The capital-budgeting method that allows comparison of the relative desirability of projects that require differing initial investments is the __________
cash-payback method.
internal rate of return method.
net present value method.
profitability index.

(TCO 8) Post audits of capital projects __________
are usually foolproof.
are done using different evaluation techniques than were used in making the original capital budgeting decision.
provide a formal mechanism by which the company can determine whether existing projects should be supported or terminated.
all of the above

(TCO 8) A company has a minimum required rate of return of 9% and is considering investing in a project that costs $140,000 and is expected to generate cash inflows of $56,000 at the end of each year for 3 years. The net present value of this project is __________
$141,736.
$28,000.
$14,174.
$1,752.

(TCO 8) Disadvantages of the annual rate of return method include all of the following, except that __________
it relies on accrual accounting numbers instead of actual cash flows.
it does not consider the time value of money.
no consideration is given as to when the cash inflows occur.
management is unfamiliar with the information used in the computation.

(TCO 9) It costs Fortune Company $12 of variable costs and $5 of fixed costs to produce one bathroom scale, which normally sells for $35. A foreign wholesaler offers to purchase 1,000 scales at $15 each. Fortune would incur special shipping costs of $1 per scale if the order were accepted. Fortune has sufficient unused capacity to produce the 1,000 scales. If the special order is accepted, what will be the effect on net income?
$2,000 increase
$2,000 decrease
$3,000 decrease
$15,000 increase

(TCO 9) Harrison Company determines that an opportunity cost of an alternate course of action is relevant to a make-or-buy decision. Which statement is true of the opportunity cost?
Should be added to the buy costs
Should be subtracted from the make costs
Should be added to the make costs
Should be ignored if it does not involve a cash outlay

(TCO 9) Whisker Clean Company spent $8,000 to produce product 89, which can be sold as is for $10,000 or processed further, incurring additional costs of $3,000, and then sold for $14,000. Which amounts are relevant to the decision about product 89?
$8,000, $10,000, and $14,000
$8,000, $3,000, and $14,000
$10,000, $3,000, and $14,000
$8,000, $10,000, $3,000, and $14,000

Multiple Choice Answers


Question 1
Which of the following is NOT a part of VRIO?
Value
Resources
Limitability
Organization

Question 2
____ is at the heart of entrepreneurship.
Vision
Leadership
Innovation
Financing

Question 3
Which is not one of the four major characteristics associated with a growing entrepreneurial firm? Growth
Financing
Inimitable
Internationalization

Question 4
____ is defined as a combination of innovative, proactive, and risk-seeking behavior that crosses national borders and is intended to create wealth in organizations.
Foreign direct investment
International entrepreneurship
International alliance partnering
Micro financing

Question 5
When internationalizing, entrepreneurs are advised to be:
Timid
Bold
Compulsive
Inflexible

Question 6
Which of the following is NOT a defining characteristic of entrepreneurship?
Opportunity
Discovery
Exploration
Age

Question 7
“Born global” is a term referring to:
Establishing large firms with major international networks
Entrepreneurial firms that attempt to internationalize from inception
The newest generation of entrepreneurs
Firms that focus on domestic issues first, then cautiously approach international opportunities.

Question 8
____ is the method of sending out exports based on unsolicited inquiries.
Direct exporting
A letter of credit
SME exporting
Sporadic exporting

Question 9
Small- and medium-sized enterprises (SMEs) account for ____ percent of the number of firms worldwide.
50
95
12
80

Question 10
Which of the following would most likely foster more entrepreneurship?
Individualistic and high uncertainty-avoidance
Collectivistic and high uncertainty-avoidance
Collectivistic and low uncertainty-avoidance
Individualistic and low uncertainty-avoidance

Question 11
The term for a global movement to help eradicate poverty by providing financing is:
Foreign direct investments
Micro financing
Venture capital investment
Entrepreneurship

Question 12
Which is NOT one of the three broad modes for entering foreign markets?
Licensing/franchising
Direct exports
Micro financing
Foreign direct investment

Question 13
Which is a major reason for China looking more towards informal financing?
Micro financing is a widespread effort.
There is a lack of formal institutions such as venture capitalists.
The Chinese government outlaws formal financing.
Family relationships are valued highly, so investors turn towards them first.

Question 14
Which of the following is NOT one of the 5 strategies for entrepreneurial SMEs to internationalize without leaving their home country?
Become suppliers for foreign firms
Export indirectly
Outsource administrative work
Harvest and exit through sell-offs

Question 15
Small- and medium-sized enterprises (SMEs) are defined as:
Firms with fewer than 50 departments in the European Union and fewer than 25 departments in the United States
Firms with fewer than 50 departments in the United States and fewer than 25 departments in the European Union
Firms with fewer than 500 employees in the European Union and fewer than 250 employees in the United States
Firms with fewer than 500 employees in the United States and fewer than 250 employees in the European Union

Question 16
All of the following are resources and capabilities of start-up ventures EXCEPT:
Strong vision
Entrepreneurial drive
Leadership
Longstanding presence

Question 17
The key differentiator between rapidly and slowly internationalizing SMEs is:
The amount and speed of foreign direct investment.
The international experience of entrepreneurs.
The ability to apply new technology.
Formal institutions and government regulation.

Question 18
____ perform an important “middleman” function by linking sellers and buyers overseas.
Export intermediaries
Indirect exporters
Sporadic exporters
Alliance partners

Question 19
A major drawback for foreign direct investment (FDI) is:
Cost
Control
Physical closeness
Commitment

Question 20
Which of the following is a popular way to enter into international service markets?
Direct exports
Foreign direct investments
Franchising
Indirect exports

Multiple Choice Answers

Firms that achieve higher growth rates without seeking external financing
have a low plowback ratio.
have less equity and/or are able to generate high net income leading to a high ROE.
none of these.
are highly leveraged.

Payout and retention ratio: Drekker, Inc., has revenues of $312,766, costs of $220,222, interest payment of $31,477, and a tax rate of 34 percent. It paid dividends of $34,125 to shareholders. Find the firm’s dividend payout ratio and retention ratio.
15%, 85%
55%, 45%
45%, 55%
85%, 15%

A firm’s capital structure is the mix of financial securities used to finance its activities and can include all of the following except
stock.
bonds.
equity options.
preferred stock.

The cash conversion cycle
shows how long the firm keeps its inventory before selling it.
begins when the firm invests cash to purchase the raw materials that would be used to produce the goods that the firm manufactures
begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash payments on its credit sales.
estimates how long it takes on average for the firm to collect its outstanding accounts receivable balance.

M&M Proposition 1: Dynamo Corp. produces annual cash flows of $150 and is expected to exist forever. The company is currently financed with 75 percent equity and 25 percent debt. Your analysis tells you that the appropriate discount rates are 10 percent for the cash flows, and 7 percent for the debt. You currently own 10 percent of the stock.
If Dynamo wishes to change its capital structure from 75 percent to 60 percent equity and use the debt proceeds to pay a special dividend to shareholders, how much debt should they issue?
$321
$375
$225
$600

Multiple Analysis: Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its depreciation and amortization expenses amounted to $84 million. The firm has 135 million shares outstanding and a share price of $12.80. A competing firm that is very similar to Turnbull has an enterprise  alue/EBITDA multiple of 5.40.
What is the enterprise value of Turnbull Corp.? Round to the nearest million dollars.
$1,334 million
$1,787 million
$453.6 million
$1,315 million

External financing needed: Jockey Company has total assets worth $4,417,665. At year-end it will have net income of $2,771,342 and pay out 60 percent as dividends. If the firm wants no external financing, what is the growth rate it can support?
25.1%
32.9%
27.3%
30.3%

Which of the following cannot be engaged in managing the business?
none of these
a sole proprietor
a general partner
a limited partner

Which of the following does maximizing shareholder wealth not usually account for?
Amount of Cash flows.
Risk.
The timing of cash flows.
Government regulation

The strategic plan does NOT identify
future mergers, alliances, and divestitures.
working capital strategies.
the lines of business a firm will compete in.
major areas of investment in real assets.

BU450 Leadership Skills

Part A: What is charismatic leadership?

Part B: Explain what is meant by the statement that charismatic leaders use active impression management with their followers to support their image. Provide and elaborate on one example.

Part C: Why is charismatic leadership considered a double-edged sword that requires careful monitoring to avert abuse?

Unless otherwise stated, answer in complete sentences, and be sure to use correct English spelling and grammar. Sources must be cited in APA format. Your response should be a minimum of one (1) single-spaced page to a maximum of two (2) pages in length; refer to the “Assignment Format” page for specific format requirements.