Advanced Strategic Management Final Exam
(BBA4) Questions With Correct Solutions
Gross Profit
Sales - Cost of Goods Sold
COGS - direct costs attributed to the production, do not include cost of sales, ads or transportation
Operating Profit
EBIT = Net Sales - COGS - OPEX
OPEX - cost that help operating the business including salaries, rent, marketing, cost of sales
OPEX and SG&A are the same
Return on Sales
ROS (%) = EBIT / Sales
How much profit is being per 1$ of sales. (how efficient is the business at turning sales into profit)
Return on Equity
ROE (%) = Net Income / Average Stockholders' Equity = (EBIT - Interest - Tax) / (Total Assets - Total
Liabilities)
Measures a firm's ability to use equity capital to generate profits that can be returned to shareholders
Return on Assets
ROA = EBIT / Total Assets
Gives managers and investors an idea as how efficient the company is at using its assets to generate
earnings
Return on Capital Employed
ROCE = EBIT / Capital Employed = EBIT / (Total Assets - Current Liabilities) or EBIT / (Shareholders
Equity + Long Term Liabilities)
Current Liabilities - short term depts (1y or less)
Long Term Liabilities - long term debts (1y+)
Measures companies profitability and the efficiency with which its capital is employed
Gross/Operating/Net Margin
Gross Margin = Gross Profit / Sales
Operating Margin = EBIT / Sales
Net Margin = Net Income / Sales
Net Income
Net Income = EBIT - Interest - Taxes
What is strategy?
1. Setting goals and objectives
2. Developing a plan (action steps in a sequence) with a time constraint
3. Allocating resources in order to carry out the plan
Corporate strategy
, Scope: Concerned with the overall purpose and scope of the organization.
Focus: Determines which industries or markets the company should compete in.
Objective: Ensures the company creates value across different businesses.
Business Strategy
Scope: Concerned with how a business competes successfully in a particular market.
Focus: Deals with positioning the business against competitors and securing a competitive advantage.
Objective: Ensures the business unit achieves its specific goals within a specific industry or market.
What is competitive advantage?
Same market but the company earns or have a chance to earn higher profit. (this could mean trading
profit now for future profits)
What is performance?
It's being effective and efficient at the same time.
Efficiency:
- Focus: Doing things with the least amount of wasted resources (time, money, effort).
- Measure: How well resources are used to achieve an outcome.
Efficacy:
- Focus: The ability to produce a desired result or effect.
- Measure: How well a task achieves its intended outcome.
What is Productivity?
Total amount of goods or services produced (output) and the organizational resources needed to
produce them (input)
What is the difference between market & industry?
Market → demand & supply
- Focus: A space where buyers and sellers interact to exchange goods, services, or information.
- Measure: Defined by demand (what customers want) and supply (what sellers offer).
Industry → offer
- Focus: A group of companies producing similar products or services.
- Measure: Defined by the nature of the product or service offered.
What is Marketing Strategy?
- Focus: How to attract, retain, and grow a customer base.
- Components: Product positioning, target audience, communication channels, and promotional
tactics.
What is the process of Strategic Management?
Environmental Analysis → Establishing Org Direction → Strategy Formulation → Strategy
Implementation → Strategic Control
What is Value? When would a customer buy a product in terms of value?
- For customers: value is created in form of "Benefit" which is transmited in a form of product or
service.
(BBA4) Questions With Correct Solutions
Gross Profit
Sales - Cost of Goods Sold
COGS - direct costs attributed to the production, do not include cost of sales, ads or transportation
Operating Profit
EBIT = Net Sales - COGS - OPEX
OPEX - cost that help operating the business including salaries, rent, marketing, cost of sales
OPEX and SG&A are the same
Return on Sales
ROS (%) = EBIT / Sales
How much profit is being per 1$ of sales. (how efficient is the business at turning sales into profit)
Return on Equity
ROE (%) = Net Income / Average Stockholders' Equity = (EBIT - Interest - Tax) / (Total Assets - Total
Liabilities)
Measures a firm's ability to use equity capital to generate profits that can be returned to shareholders
Return on Assets
ROA = EBIT / Total Assets
Gives managers and investors an idea as how efficient the company is at using its assets to generate
earnings
Return on Capital Employed
ROCE = EBIT / Capital Employed = EBIT / (Total Assets - Current Liabilities) or EBIT / (Shareholders
Equity + Long Term Liabilities)
Current Liabilities - short term depts (1y or less)
Long Term Liabilities - long term debts (1y+)
Measures companies profitability and the efficiency with which its capital is employed
Gross/Operating/Net Margin
Gross Margin = Gross Profit / Sales
Operating Margin = EBIT / Sales
Net Margin = Net Income / Sales
Net Income
Net Income = EBIT - Interest - Taxes
What is strategy?
1. Setting goals and objectives
2. Developing a plan (action steps in a sequence) with a time constraint
3. Allocating resources in order to carry out the plan
Corporate strategy
, Scope: Concerned with the overall purpose and scope of the organization.
Focus: Determines which industries or markets the company should compete in.
Objective: Ensures the company creates value across different businesses.
Business Strategy
Scope: Concerned with how a business competes successfully in a particular market.
Focus: Deals with positioning the business against competitors and securing a competitive advantage.
Objective: Ensures the business unit achieves its specific goals within a specific industry or market.
What is competitive advantage?
Same market but the company earns or have a chance to earn higher profit. (this could mean trading
profit now for future profits)
What is performance?
It's being effective and efficient at the same time.
Efficiency:
- Focus: Doing things with the least amount of wasted resources (time, money, effort).
- Measure: How well resources are used to achieve an outcome.
Efficacy:
- Focus: The ability to produce a desired result or effect.
- Measure: How well a task achieves its intended outcome.
What is Productivity?
Total amount of goods or services produced (output) and the organizational resources needed to
produce them (input)
What is the difference between market & industry?
Market → demand & supply
- Focus: A space where buyers and sellers interact to exchange goods, services, or information.
- Measure: Defined by demand (what customers want) and supply (what sellers offer).
Industry → offer
- Focus: A group of companies producing similar products or services.
- Measure: Defined by the nature of the product or service offered.
What is Marketing Strategy?
- Focus: How to attract, retain, and grow a customer base.
- Components: Product positioning, target audience, communication channels, and promotional
tactics.
What is the process of Strategic Management?
Environmental Analysis → Establishing Org Direction → Strategy Formulation → Strategy
Implementation → Strategic Control
What is Value? When would a customer buy a product in terms of value?
- For customers: value is created in form of "Benefit" which is transmited in a form of product or
service.
