Competitive Advantage Is a Core Competency That Sets an Organization

question 237

True/False

Competitive advantage is a core competency that sets an organization apart from its competitors and gives it an advantage over them in the marketplace.

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Definitions:

Financial Distress

A situation where a company struggles to meet or has difficulty paying off its financial obligations to creditors.

Agency Costs

Expenses, either direct or indirect, that are borne by a principal as a result of having delegated authority to an agent. An example is the costs borne by shareholders to encourage managers to maximize a firm’s stock price rather than act in their own self-interests. These costs may also arise from lost efficiency and the expense of monitoring management to ensure that debtholders’ rights are protected.

Bankruptcy Costs

Expenses and fees associated with the process of declaring bankruptcy, including legal, administrative, and any potential asset liquidation costs.

Business Risk

The risk inherent in the operations of the firm, prior to the financing decision. Thus, business risk is the uncertainty inherent in a total risk sense, future operating income, or earnings before interest and taxes. Business risk is caused by many factors. Two of the most important are sales variability and operating leverage.