Which of the Following Statements About Changes in the Way

question 26

Multiple Choice

Which of the following statements about changes in the way advertising agencies are being compensated is true?

• A)Most clients do not pay full commissions to their agencies because they prefer to use some type of fee or incentive-based system as they seem more equitable than the commission system.
• B)With the move toward integrated marketing services,it is likely that there will be a return to the commission system of compensation.
• C)From the viewpoints of both the client and the agency,the traditional commission system is much superior to negotiated commissions.
• D)Since most clients want their agencies to be in total charge of the integrated marketing communications process,they are willing to compensate them based on media commissions.
• E)In a negotiated commission system,commission is usually greater than 15 percent.

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Definitions:

Risk

Exposure to the chance of loss or damage, often evaluated in financial terms for its potential impact on investment returns.

Sensitivity Analysis

A technique used to determine how different values of an independent variable will impact a particular dependent variable under a given set of assumptions.

Capital Budgeting

The process a business undergoes to evaluate potential major projects or investments.

Net Present Value

A financial metric that calculates the difference between the present value of cash inflows and the present value of cash outflows over a period of time.