A Skimming Pricing Policy Is Likely to Be Most Effective

question 102

Multiple Choice

A skimming pricing policy is likely to be most effective when (1) enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable; (2) the high initial price will not attract competitors; (3) lowering the price has only a minor effect on increasing the sales volume and reducing the unit cost; and (4) __________.

• A)enough prospective customers are willing to buy immediately at the high initial price to make these sales profitable
• B)consumers tend to be price-sensitive
• C)customers interpret the high price as signifying high quality
• D)lowering the price has a major effect on increasing the sales volume
• E)consumers perceive your product to be similar to other products on the market

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Definitions:

Debt-to-Equity

A metric used to evaluate a company's financial leverage, calculated by dividing its total liabilities by its shareholders' equity.

Earnings Per Share

A company's profit allocated to each outstanding share of common stock, indicating the company's profitability on a per-share basis.

Receivable Turnover Ratio

A measure of how efficiently a company collects its accounts receivable, calculated by dividing net credit sales by average accounts receivable.

Inventory Turnover Ratio

A metric that calculates the number of times inventory is sold or consumed in a given time frame, reiterating the effciency of inventory management.