A Firm That Provides Tax Services to the Public Intends

question 40

Multiple Choice

A firm that provides tax services to the public intends to offer a premium tax-return service at a higher price than their current services. The managers of the company ask experts in marketing to determine how much an effective ad campaign for such a service would cost, and by how much sales would increase. They consult experts in economics to calculate the increases in revenue from the success of the campaign, experts in operations to determine the cost of offering the service, and experts in strategy to anticipate possible counter-moves by competitors. Which of the following points about the role of financial managers does this example illustrate?

• A) Real-world decisions are complex and require information from many sources if the decisions are to be valid.
• B) Determining the costs associated with making a decision is easier than determining the potential benefits of the decision.
• C) All of the costs and benefits associated with a decision can never be fully identified.
• D) Ultimately the decision whether to take a certain course of action rests with the financial managers of a company.

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Definitions:

Expected Value

The anticipated value or mean outcome of a variable, calculated as the sum of all possible values each multiplied by its probability of occurrence.

Sample Information

Data collected from a subset of a larger group or population to infer or analyze characteristics of the whole group.

Cups of Coffee

A unit of measure or a reference to the quantity of coffee consumed or required for a given purpose.

Variance

A measure of the spread or dispersion of a set of data points, calculated as the average of the squared differences from the mean.