The Owner of Tastee Cookies Needs to Decide Whether to Lease

question 73

Multiple Choice

The owner of Tastee Cookies needs to decide whether to lease a small, medium, or large new retail outlet. She estimates that monthly profits will vary with demand for her cookies as follows: $\begin{array}{|l|l|l|l|}\hline\text {SIZE}\\\text {OF}&\text {DEMAND}\\\hline \text { OUTLET } & \text { LOW } && \text { HIGH } \\\hline \text { Small } & \$ 1,000 && 1,000 \\\hline \text { Medium } & 500 && 2,500 \\\hline \text { Large } & 0 && 3,000 \\\hline\end{array}$ If she uses the maximax criterion, what size outlet will she decide to lease?

• A) small
• B) medium
• C) large
• D) either small or medium
• E) either medium or large

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Definitions:

Financial Planning

The process of setting objectives, assessing assets and resources, estimating future financial needs, and making plans to achieve monetary goals.

Pro Forma Statement

A financial report created by making assumptions about events and transactions that have not yet taken place.

Financing Policies

Guidelines or principles that a company uses to decide how to finance its activities, including debt and equity financing choices.

Dividend Policies

The guidelines a company follows to decide how much it will pay out to shareholders in dividends.