Which One of the Following Is NOT a Characteristic of a Firm

question 56

Multiple Choice

Which one of the following is NOT a characteristic of a firm that has chosen a captive company strategy?

• A) It is most appropriate for a company with a strong competitive position in a growing industry.
• B) The firm reduces its functional activities to reduce costs.
• C) The firm gains a certainty of sales and production in return for becoming heavily dependent upon another firm for at least 75% of its sales.
• D) One of its customers makes up a large percentage of the company's sales and wants the company to keep operating as its supplier.
• E) Management desperately seeks an "angel" to guarantee the company's continued existence.

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Definitions:

Net Operating Income

The earnings a business retains after subtracting operational costs, prior to the deduction of interest and taxes.

Total Contribution Margin

The difference between a company's sales revenue and variable costs, representing the amount available to cover fixed costs and contribute to profit.

Net Operating Income

A measure of a company's profitability excluding interest and tax expenses.

Operating Income

This is the profit realized from a business's operations, calculated by subtracting operating expenses from gross profit.