When Deciding on Which New Products to Develop, a Firm

question 59

Multiple Choice

When deciding on which new products to develop, a firm must devote people, time, and money to designing a new product. Because any firm has only limited resources, it

• A) should wait until its competitors develop a similar product before deciding on devoting resources to its own product development.
• B) is not able to develop more than one new product at a time.
• C) must be certain that the product it chooses to develop will be successful or it will not be able to stay in business.
• D) faces a trade-off because resources used to develop one product will not be available to develop another product.

Grasp the principles of bond issuance, redemption, and the effects on company’s financial health and credit rating.

Understand the concept and accounting treatment for capital and operating leases.

Differentiate between various types of debt instruments including debenture bonds, mortgage payable, and notes payable.

Acknowledge the role of board of directors and bondholders' rights in bond-related decisions.

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Definitions:

Constrained Resource

A limited resource in a production process that can restrict the company's ability to produce goods, impact scheduling, and ultimately affect throughput.

Current Profitability

A measure of how much profit a company is generating at the current time, often used to assess financial health.

Constrained Resource

A factor or resource in production that limits the output or performance of a process.

Profitability Order

A method of organizing projects or investments based on their profitability or expected return.