Topic 6

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What is the primary economic objective of all firms?

To diversify product offerings

To maximize accounting profit (correct)

To reduce operational costs

To expand market share

How is accounting profit defined?

Net income after taxes and interest payments

Revenue minus the total liabilities of a firm

Gross sales before any deductions

Total revenue minus costs incurred to generate that revenue (correct)

What time frame is typically used for calculating accounting profit?

Biennially

Monthly

Annually (correct)

Quarterly

What does measuring profitability help to compare among different firms?

Profit achievement in relation to financial indicators Signup and view all the answers

Which of the following measures is used to assess profitability?

Return on equity Signup and view all the answers

What does economic profit measure in a firm's financial performance?

Market value and risk Signup and view all the answers

Which aspect is NOT a shortcoming of economic profit?

Focuses on future potential Signup and view all the answers

Economic Profit is calculated using which of the following formulas?

EPt = EMVt - EMVt-1 + DIVt Signup and view all the answers

Why is economic profit considered superior to accounting profit?

It factors in market values and risk Signup and view all the answers

What does shareholder return (SR) help to compare?

Returns across similar companies Signup and view all the answers

Which perspective holds that management's primary responsibility is maximizing profits?

Classical view Signup and view all the answers

Which group is NOT considered an organizational stakeholder in the context of social responsibility?

Investors Signup and view all the answers

What is one responsibility highlighted in the socioeconomic view of management?

Improving societal conditions Signup and view all the answers

What does corporate strategy primarily determine?

The businesses a firm should be in and how it can grow. Signup and view all the answers

Which strategy focuses on improving efficiency within each functional area?

Functional strategy Signup and view all the answers

What is the primary advantage of vertical integration?

It ensures high-quality production and coordination. Signup and view all the answers

What is unrelated diversification?

Diversifying into entirely different business areas. Signup and view all the answers

Which of the following statements describes backward vertical integration?

A company acts as its own supplier. Signup and view all the answers

Which type of strategy is focused on managing local subsidiaries to adapt to domestic markets?

Multidomestic strategy Signup and view all the answers

What is a main reason for pursuing diversification in business?

To enter attractive industries and reduce risk. Signup and view all the answers

Which scope refers to a firm's variety of products offered?

Horizontal scope Signup and view all the answers

What characterizes a global strategy?

Creating standardized goods for a global market Signup and view all the answers

Which of the following is NOT a form of growth?

Cost leadership Signup and view all the answers

What is the primary focus of a differentiation strategy?

Creating unique products valued by customers Signup and view all the answers

What distinguishes radical innovation from incremental innovation?

Radical innovation signifies a major departure from existing solutions Signup and view all the answers

Which statement best defines innovation?

Transforming creative ideas into practical applications Signup and view all the answers

What is an example of process innovation?

Implementing a new marketing strategy Signup and view all the answers

Which of the following best describes a transnational strategy?

Combining global efficiency with local responsiveness Signup and view all the answers

What is internal growth also known as?

Organic growth Signup and view all the answers

What is the primary purpose of a code of ethics in an organization?

To establish standards of behavior for employees Signup and view all the answers

Which of the following best describes sustainability in the context of economic activities?

Balancing immediate profits with long-term environmental preservation Signup and view all the answers

Which of the following is an area of managerial ethics?

How employees treat the organization Signup and view all the answers

What does the SWOT analysis primarily assess?

Strengths and weaknesses of the organization Signup and view all the answers

What is implied by the term 'triple bottom line'?

Assessment based on social, environmental, and financial performance Signup and view all the answers

Which of the following actions illustrates ethical behavior in an organization?

Respecting employee privacy and confidentiality Signup and view all the answers

What does the term 'investors' refer to in a business context?

Individuals or groups providing financial resources to a company Signup and view all the answers

Which of the following is NOT considered an aspect of how an organization treats its employees?

Customer service procedures Signup and view all the answers

What is the main focus of the strategic management process?

Developing a plan to compete and satisfy customers Signup and view all the answers

What best characterizes the term 'ethical behavior'?

Actions guided by ethical standards and social norms Signup and view all the answers