John Petersen Is Thinking About Starting a Firm in the Specialty

question 53

Multiple Choice

John Petersen is thinking about starting a firm in the specialty chemical industry. In the industry analysis John has been conducting, one thing he has noticed is that the specialty chemical industry is characterized by the following factors: high supplier concentration, high switching costs for buyers when they switch from one supplier to another, and no attractive substitutes for the products that most of the suppliers provide. These factors concern John because they tell him that the profitability of the specialty chemical industry is suppressed by the:

• A) threat of substitutes
• B) bargaining power of buyers
• C) rivalry among existing firms
• D) bargaining power of suppliers
• E) threat of new entrants

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Definitions:

Accounts Receivable

Money owed to a company by its customers from sales or services rendered on credit, recorded as an asset on the balance sheet.

Accounts Payable

Liabilities of a business arising from credit purchases from suppliers, displayed on the company's balance sheet as money owed.

Assets Sold

The sale of company assets, which could include equipment, properties, or other resources owned by the company.

Owner's Equity

The residual interest in the assets of an entity after deducting liabilities, representing the ownership interest.