Toy Sales Have Declined by 10 Percent Each Year, Forcing

question 14

Multiple Choice

Toy sales have declined by 10 percent each year, forcing many retailers to exit the industry. To eliminate its remaining competition, Bleaker Toys sells all of its product at a loss and relies on its significant cash holdings to cover costs until its competition is forced to exit the industry. Is this an example of a successful strategy? Why or why not?

• A) Yes. Any strategy that forces competition from the market is by definition successful.
• B) Yes. Bleaker has achieved a sustainable competitive advantage by selling its toys at a lower price than competitors.
• C) No. Bleaker has failed to create value for its customers.
• D) No. Bleaker's strategy and competitive advantage are unsustainable.

---

Definitions:

Straight-Line Method

A method of depreciation that allocates an asset's cost evenly throughout its useful life.

Carrying Amount

The value at which an asset or liability is recognized on the balance sheet, calculated as its original cost minus depreciation or amortization.

Useful Life

The period over which an asset is expected to be available for use by an entity; or the number of production or similar units expected to be obtained from the asset by an entity.

Management Fee

A charge levied by an investment manager for managing an investment fund's assets, often calculated as a percentage of the assets under management.