Refer to the Scenario Below to Answer the Following Questions

question 105

Multiple Choice

Refer to the scenario below to answer the following questions.
Decision-making Biases (Scenario)
Frank is president of Mega Manufacturing, a Canadian company that makes automobile parts. Sales and profits are down sharply this quarter, and Frank needs to analyze the series of events that have led to the poor performance. Frank begins by reviewing his recent interactions with Mike, the vice-president of sales.
-Frank reluctantly agreed to authorize Mike's request for additional funds to pursue the Japanese car maker, despite some ongoing concerns he has had about how this contract could impact his current agreements with three U.S. car companies. If Mega were to win the Japanese business, they would not have sufficient production capacity to meet all their contract obligations. Frank's decision demonstrates which of the following?

• A) confirmation bias
• B) hindsight bias
• C) overconfidence bias
• D) self-serving bias
• E) framing bias

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Definitions:

Equity Multiplier

A financial ratio that measures a company's leverage by comparing its total assets to its total equity.

Year 2

The second year in a specified timeframe, often used in financial and performance analysis.

Average Collection Period

A financial metric indicating the average number of days it takes for a company to receive payments owed by its customers.

Times Interest Earned

A financial ratio that measures a company's ability to meet its interest obligations, calculated as earnings before interest and taxes divided by interest expense.