A Tire Retailer Is Advertising a Very Low Price on a Popular

question 176

Multiple Choice

A tire retailer is advertising a very low price on a popular size tire. When a customer comes into the store, the clerk says the low-priced item is sold out, and tries to convince the customer to buy the top-of-the-line model-claiming the low priced model is not a very good buy even at the low price. This is an example of:

• A) leader pricing.
• B) full-line pricing.
• C) value in use pricing.
• D) price lining.
• E) bait pricing.

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Definitions:

Ratio Analysis

A quantitative method of gaining insight into a company's liquidity, operational efficiency, and profitability by comparing financial statement items.

Financial Statements

Official records that outline a company's financial activities and conditions, including the balance sheet, income statement, and cash flow statement.

Firm's Financial Position

The status of a company's assets, liabilities, and equity at a given point in time, as reflected in its financial statements.

Market/Book Ratio

Also known as the price-to-book ratio, it compares a company's market value with its book value, indicating how much investors are paying for each dollar of net assets.