MGT 100 EXAM 1 TEST QUESTIONS AND CORRECT
ANSWERS
Equation for Operating Income - ANSWER Revenue - Operating Costs (COS,
R&D, SGA)
Equation for Net Income - ANSWER Revenue- all costs (including taxes,
interest, one time cost)
Equation for Gross Margin % - ANSWER (Revenue- Cost of sales)/ revenue
Equation for Return on Assets - ANSWER net income/ total assets
bull market - ANSWER economy is great, stock prices are rising
bear market - ANSWER economy is bad and recession is looming
Equation for profit - ANSWER price- cost
corporate governance - ANSWER ties to align top level incentives and decision
rights to maximize shareholder value, protect shareholder assets, and produce
financial statements the meet legal requirements
Give management stake in company so they will look at for shareholder value
along with their own
Apple's 10k and proxy - ANSWER a. Proxy
i. Decrease in net sales and operating income since 2005 (but increase since
2014)
ii. Information about board members and their positions and compensation
iii. Proposals people will be voting on
b. 10k
i. Future looking statements
ii. Products and services sales data
,Jensen and Meckling: The Nature of Man - ANSWER 5 models of human
behavior:
REMM= resourceful, evaluative, maximizing model - no needs but unlimited
wants, cares about everything, willing to make trade offs / substitutions, wants
to maximize, creative (in trying to avoid constraints), need government to
restore equilibrium
Economic= money maximizing (short run) - only want money income
Sociological= behavior is product of environment- individuals are social
victims, does not explain why customs change (cannot account for changes in
human behavior), results are due to environmental effort not an individual's
conscious effort (i.e. someone steals because society made him a thief)-
individuals behave as expected for marxist model (do not evaluate situations)
Psychological= Maslow's hierarchy of needs (physiological, safety, love, self-
actualization), no substitution, unwilling to give up a more important item to
satisfy a higher item)- people do not follow this (examples from OB literature)
Political= REM, maximize public good v own welfare, individual is a perfect
agent seeking to maximize public good (denies his own preferences)- would just
replace a manager that is doing a bad job
REMM dominates all other models
Buzzwords: 5 models of behavior (names), social victims, maximizing, needs/
wants
assets - ANSWER things you own and control (you own lollipop)
on balance sheet: assets= liabilities+ shareholder equity
liabilities - ANSWER obligations that you need to pay to other ppl (you owe
sally lollipops)
equity - ANSWER ownership in company
5 forces analysis - ANSWER buyers, competition, entry barriers, substitutes,
suppliers
applies to apple
1980: great customers: weak, fragmented, willing to pay high price for brand
1997: difficult, powerful consumers: know what they want and don't want to
pay a lot
,jensen's triangle - ANSWER rewards/punishments - decision rights -
performance measures
demand shifters - ANSWER # of buyers, income, price of complements/
substitutes, tastes, expectations
NOT change in price of that good acronym: BITERS (buyers, income, taste,
expectations, related goods)
supply shifters - ANSWER input prices, technology, # sellers, expectations
(when expect future rise in price, reduct supply now)
NOT change in price of that good acronym: TONERS (tech, other goods,
number of sellers, expectations, research cost, subsidies/taxes)
hub and spoke system - ANSWER local airports offer flights to a central airport
where international or long-distance flights are available
system most airlines use (not southwest)
individual firm's product demand curve - ANSWER horizontal at price
price effect - ANSWER lower price lowers revenue
output effect - ANSWER higher output raises revenue
excludable good - ANSWER A good is excludable if a person can be prevented
from using it (cable)
rival good - ANSWER A good is rival in consumption if one person's use of it
diminishes others' use (a field)
private good - ANSWER (excludable and rival) ex. food
public good - ANSWER non excludable non rival ex. Natural defense, parks
club good - ANSWER excludable and non rival ex. Cable
common resource - ANSWER non excludable and rival ex. Fish in sea
, Coase theorem - ANSWER if private parties can costlessly bargain over the
allocation of resource, they can solve the externalities problem on their own
bounded rationality - ANSWER in decision-making, rationality of individuals
is limited by the information they have, the cognitive limitations of their minds,
and the finite amount of time they have to make a decision (more dilemmas→
more expensive)
opportunistic behavior - ANSWER party A takes advantage of superior
knowledge by failing to disclose info to B
Apple's Proxy and 10k - ANSWER Proxy
Decrease in net sales and operating income since 2005 (but increase since 2014)
Information about board members and their positions and compensation
Proposals people will be voting on
10k
Future looking statements
Products and services sales data
Jensen and Meckling, The Nature of Man - ANSWER 5 models of human
behavior:
REMM= resourceful, evaluative, maximizing model - no needs but unlimited
wants, cares about everything, willing to make trade offs / substitutions, wants
to maximize, creative (in trying to avoid constraints), need government to
restore equilibrium
Economic= money maximizing (short run) - only want money income
Sociological= behavior is product of environment- individuals are social
victims, does not explain why customs change (cannot account for changes in
human behavior), results are due to environmental effort not an individual's
conscious effort (i.e. someone steals because society made him a thief)-
individuals behave as expected for marxist model (do not evaluate situations)
Psychological= Maslow's hierarchy of needs (physiological, safety, love, self-
actualization), no substitution, unwilling to give up a more important item to
satisfy a higher item)- people do not follow this (examples from OB literature)
Political= REM, maximize public good v own welfare, individual is a perfect
agent seeking to maximize public good (denies his own preferences)- would just
replace a manager that is doing a bad job
REMM dominates all other models
ANSWERS
Equation for Operating Income - ANSWER Revenue - Operating Costs (COS,
R&D, SGA)
Equation for Net Income - ANSWER Revenue- all costs (including taxes,
interest, one time cost)
Equation for Gross Margin % - ANSWER (Revenue- Cost of sales)/ revenue
Equation for Return on Assets - ANSWER net income/ total assets
bull market - ANSWER economy is great, stock prices are rising
bear market - ANSWER economy is bad and recession is looming
Equation for profit - ANSWER price- cost
corporate governance - ANSWER ties to align top level incentives and decision
rights to maximize shareholder value, protect shareholder assets, and produce
financial statements the meet legal requirements
Give management stake in company so they will look at for shareholder value
along with their own
Apple's 10k and proxy - ANSWER a. Proxy
i. Decrease in net sales and operating income since 2005 (but increase since
2014)
ii. Information about board members and their positions and compensation
iii. Proposals people will be voting on
b. 10k
i. Future looking statements
ii. Products and services sales data
,Jensen and Meckling: The Nature of Man - ANSWER 5 models of human
behavior:
REMM= resourceful, evaluative, maximizing model - no needs but unlimited
wants, cares about everything, willing to make trade offs / substitutions, wants
to maximize, creative (in trying to avoid constraints), need government to
restore equilibrium
Economic= money maximizing (short run) - only want money income
Sociological= behavior is product of environment- individuals are social
victims, does not explain why customs change (cannot account for changes in
human behavior), results are due to environmental effort not an individual's
conscious effort (i.e. someone steals because society made him a thief)-
individuals behave as expected for marxist model (do not evaluate situations)
Psychological= Maslow's hierarchy of needs (physiological, safety, love, self-
actualization), no substitution, unwilling to give up a more important item to
satisfy a higher item)- people do not follow this (examples from OB literature)
Political= REM, maximize public good v own welfare, individual is a perfect
agent seeking to maximize public good (denies his own preferences)- would just
replace a manager that is doing a bad job
REMM dominates all other models
Buzzwords: 5 models of behavior (names), social victims, maximizing, needs/
wants
assets - ANSWER things you own and control (you own lollipop)
on balance sheet: assets= liabilities+ shareholder equity
liabilities - ANSWER obligations that you need to pay to other ppl (you owe
sally lollipops)
equity - ANSWER ownership in company
5 forces analysis - ANSWER buyers, competition, entry barriers, substitutes,
suppliers
applies to apple
1980: great customers: weak, fragmented, willing to pay high price for brand
1997: difficult, powerful consumers: know what they want and don't want to
pay a lot
,jensen's triangle - ANSWER rewards/punishments - decision rights -
performance measures
demand shifters - ANSWER # of buyers, income, price of complements/
substitutes, tastes, expectations
NOT change in price of that good acronym: BITERS (buyers, income, taste,
expectations, related goods)
supply shifters - ANSWER input prices, technology, # sellers, expectations
(when expect future rise in price, reduct supply now)
NOT change in price of that good acronym: TONERS (tech, other goods,
number of sellers, expectations, research cost, subsidies/taxes)
hub and spoke system - ANSWER local airports offer flights to a central airport
where international or long-distance flights are available
system most airlines use (not southwest)
individual firm's product demand curve - ANSWER horizontal at price
price effect - ANSWER lower price lowers revenue
output effect - ANSWER higher output raises revenue
excludable good - ANSWER A good is excludable if a person can be prevented
from using it (cable)
rival good - ANSWER A good is rival in consumption if one person's use of it
diminishes others' use (a field)
private good - ANSWER (excludable and rival) ex. food
public good - ANSWER non excludable non rival ex. Natural defense, parks
club good - ANSWER excludable and non rival ex. Cable
common resource - ANSWER non excludable and rival ex. Fish in sea
, Coase theorem - ANSWER if private parties can costlessly bargain over the
allocation of resource, they can solve the externalities problem on their own
bounded rationality - ANSWER in decision-making, rationality of individuals
is limited by the information they have, the cognitive limitations of their minds,
and the finite amount of time they have to make a decision (more dilemmas→
more expensive)
opportunistic behavior - ANSWER party A takes advantage of superior
knowledge by failing to disclose info to B
Apple's Proxy and 10k - ANSWER Proxy
Decrease in net sales and operating income since 2005 (but increase since 2014)
Information about board members and their positions and compensation
Proposals people will be voting on
10k
Future looking statements
Products and services sales data
Jensen and Meckling, The Nature of Man - ANSWER 5 models of human
behavior:
REMM= resourceful, evaluative, maximizing model - no needs but unlimited
wants, cares about everything, willing to make trade offs / substitutions, wants
to maximize, creative (in trying to avoid constraints), need government to
restore equilibrium
Economic= money maximizing (short run) - only want money income
Sociological= behavior is product of environment- individuals are social
victims, does not explain why customs change (cannot account for changes in
human behavior), results are due to environmental effort not an individual's
conscious effort (i.e. someone steals because society made him a thief)-
individuals behave as expected for marxist model (do not evaluate situations)
Psychological= Maslow's hierarchy of needs (physiological, safety, love, self-
actualization), no substitution, unwilling to give up a more important item to
satisfy a higher item)- people do not follow this (examples from OB literature)
Political= REM, maximize public good v own welfare, individual is a perfect
agent seeking to maximize public good (denies his own preferences)- would just
replace a manager that is doing a bad job
REMM dominates all other models
