A Low Price Buys Market Share but Not Market Loyalty

question 106

Multiple Choice

A low price buys market share but not market loyalty. The same customers will shift to any lower-priced product that may come along. This is called the ________ trap.

• A) low-price
• B) relative-market-share
• C) shallow-pockets
• D) target-market-share
• E) fragile-market-share

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Definitions:

Receivables Turnover

A financial ratio that measures how efficiently a company collects debt from its credit sales, calculated by dividing net credit sales by the average accounts receivable.

Inventory Turnover Ratio

A measure of how quickly a company sells its inventory within a given period, calculated by dividing the cost of goods sold by the average inventory.

Credit Sales

Sales made by a business allowing the customer to pay at a later date, often tracked through accounts receivable.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations using its current assets.