Which of the Following Is a Disadvantage Associated with Licensing

question 54

Multiple Choice

Which of the following is a disadvantage associated with licensing?

• A) The licensor has lower wages and prices.
• B) The licensor may create its own competition.
• C) The licensor has increased profit potential.
• D) The licensor has complete control of the product.
• E) The firm's reputation is improved if it selects a poor choice as a licensee.

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Definitions:

Abandonment Option

A financial decision allowing companies to cease a project or investment to avoid further losses.

NPV

Net Present Value; a calculation used to assess the profitability of an investment, considering the present value of its cash flows.

Variances

Differences between planned financial outcomes and actual results, used in budgeting and financial management to analyze performance.

Abandonment Option

A form of real option in capital budgeting, giving a company the ability to abandon or terminate a project during its life if it becomes unprofitable.