The Level of Entry Barriers Is Only Relevant to Potential

question 51

Multiple Choice

The level of entry barriers is only relevant to potential competitors because:

• A) Firms that are established in an industry have already overcome the barriers to entry.
• B) The existence of high entry barriers has little impact on overall industry profitability.
• C) Competitive markets are dynamic, so established firms expect that there will always be new entrants.
• D) The level of entry barriers is relevant to both existing and potential firms due to the competitive consequences for both.

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Definitions:

Net Working Capital

A liquidity calculation that represents the difference between a business's current assets less its current liabilities, highlighting operational efficiency and short-term financial health.

Equivalent Annual Cost

A financial metric that calculates the annual cost of owning, operating, and maintaining an asset over its entire life, allowing for the comparison of different assets' costs.

Required Return

This is the minimum rate of return on an investment that investors expect or require to make it worthwhile.

Accounts Payable

The amount of money a company owes its suppliers for goods and services purchased on credit.