All of the Following Are Limitations of the BCG Matrix

question 103

Multiple Choice

All of the following are limitations of the BCG Matrix EXCEPT

• A) viewing every business as a star, cash cow, dog or question mark can be an oversimplification.
• B) the Matrix requires at least three years worth of data.
• C) the Matrix does not reflect divisional or industry growth over time.
• D) the Matrix does not allow a company to be classified as somewhere in between two categories.
• E) variables such as size of market and competitive advantages are not considered in the Matrix.

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Definitions:

Discounted Payback Method

A capital budgeting technique that calculates the time required to recoup the initial investment in present value terms.

Normal Cash Flows

Cash flows that occur in a predictable pattern, where an initial outlay is followed by a series of income receipts.

Real Internal Rate of Return

The real internal rate of return is the annual rate of growth an investment is expected to generate, adjusted for inflation.

Multiple IRR Problem

A situation in capital budgeting where a project has more than one internal rate of return due to changing cash flow signs over the project's duration.