The Value of Determining the Relative Competitive Strength of Each

question 82

Multiple Choice

The value of determining the relative competitive strength of each business a company has diversified into is:

• A) to have a quantitative basis for identifying which businesses have large/small competitive advantages or competitive disadvantages vis-à-vis the rivals in their respective industries.
• B) to have a quantitative basis for rating them from strongest to weakest in terms of contributing to the corporate parent's revenue growth.
• C) to compare resource strengths and weaknesses,business by business.
• D) to have a quantitative basis for rating them from strongest to weakest in contending for market leadership in their respective industries.
• E) to have a quantitative basis for rating them from strongest to weakest in terms of contributing to the corporate parent's profitability.

Differentiate between beginning-of-period and end-of-period payment scenarios and their impact on financial outcomes.

Calculate the future value of a series of payments or investments using varied interest rates and time periods.

Determine the rate of return on investments and understand its implications on investment decisions.

Identify and analyze the costs and benefits of taking loans, including the calculation of total interest paid over the life of the loan.

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Definitions:

Current Income

The total amount of money earned within a specific time period, including wages, dividends, and interest.

Clientele Effect

The theory suggesting that changes in dividend policy will attract a different class of shareholders or cause the current shareholders to sell their shares.

Residual Dividend Theory

The idea that corporations pay dividends with whatever money is left over out of earnings after all projects with a positive NPV are undertaken.

Signaling Effect

The idea that actions taken by a company can provide information to the market or signal the company’s future prospects, potentially affecting its stock price.