Which of the Following Is True of Licensing/franchising

question 49

Multiple Choice

Which of the following is true of licensing/franchising?

• A) The licensor/franchisor has to bear the full costs and risks associated with foreign expansion.
• B) The licensing/franchising strategy creates very limited competitors.
• C) The licensor/franchisor has the ability to coordinate globally.
• D) The licensor/franchisor does not have tight control over production and marketing.

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Definitions:

Contribution Margin Ratio

A measure indicating the percentage of each sales dollar that contributes to covering fixed costs and generating profit, calculated as (Sales Revenue - Variable Costs) / Sales Revenue.

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums, providing predictability in budgeting.

Break Even

It is the point at which total costs and total revenues are equal, meaning there is no profit or loss.

Operating Income

Earnings before interest and taxes (EBIT), representing a company’s profit from its core business operations.