If an Industry Earns a Return on Capital in Excess

question 40

Multiple Choice

If an industry earns a return on capital in excess of its cost of capital:

• A)It will soon attracts the attention of competition authorities
• B)Workers will push for higher pay and benefits causing the level of profitability to fall
• C)It will attract the attention of potential entrants and,unless protected by high barriers to entry,the return on capital will fall
• D)Firms within the industry will over-invest causing the return on capital to fall

Identify the components and benefits of conducting a SWOT and competitive analysis in business strategy formulation.

Acknowledge the influence of external and internal environments on business operations and strategy.

Understand the principles of goal setting and the characteristics of effective goals.

Recognize the importance of competitive advantage and how it can be achieved and maintained.

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Definitions:

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account columns to check the accuracy of the entries.

Journal Entry

A record in accounting that represents a transaction, documenting the debit and credits affected by it.

Debit

A bookkeeping record that elevates the value of an asset or expense account, or reduces the value of a liability or equity account.

Credit

A bookkeeping entry that increases the balance of a liability, equity account, or revenue, or decreases the balance of an asset or expense account.