BioSense Prosthetics Was a Leader in the Prosthetic Arm Market

question 11

Multiple Choice

BioSense Prosthetics was a leader in the prosthetic arm market and profits from it were very high.The firm developed a new computerized prosthetic arm that would render its previous prosthetics obsolete.It decided to withhold the new computerized prosthetic arm from the market.This will allow the firm to:

• A) minimize its return on investment in developing each generation of the product.
• B) make its products backward compatible.
• C) avoid cannibalization of the sales of its current prosthetics.
• D) build a larger installed base for the new computerized prosthetic.

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Definitions:

Working Capital

The gap between a firm's current assets and current liabilities, signifying its short-term financial stability and operational effectiveness.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year.

Capital Lease

A lease agreement that has the characteristics of a purchase by the lessee, including transfer of ownership by the end of the lease term.

Leased Asset

A leased asset is a possession that is rented under a lease agreement, granting the lessee the right to use the asset in exchange for periodic lease payments.