MGT 8803 Final ACTUAL Questions and
CORRECT Answers
Days Sales Outstanding - CORRECT ANSWER✔✔- determines the ability of a business to
effectively issue credit to customers and be paid back on a timely basis. Can be an indicator
of product quality issues or taking on bad credit risks
Inventory Turnover - CORRECT ANSWER✔✔- calculates the time it takes to sell off
inventory. Low ratio indicates a business has excessive investment in inventory and is at risk
of having obsolete inventory
Asset Turnover - CORRECT ANSWER✔✔- measures the value of a company's sales or
revenues relative to the value of its assets. Used as a measure of efficiency with which the
company generates revenue
Current Ratio - CORRECT ANSWER✔✔- compares current assets to current liabilities to
see if a business has enough cash to pay its immediate liabilities. Ratio less than 2 indicates
liquidity risk
Quick Ratio - CORRECT ANSWER✔✔- measures the level of the most liquid current assets
available to cover current liabilities. Excludes inventory and pre-paid expenses b/c less liquid.
Higher ratio means better liquid position
Debt to Equity Ratio - CORRECT ANSWER✔✔- compares the proportion of debt to equity
to see if a business has taken on too much debt
Gross Margin - CORRECT ANSWER✔✔- calculates the proportion of earnings generated by
the sale of goods or services before admin and other non-product costs are excluded (decline
could indicate pricing pressures on core operations)
Net Profit Margin - CORRECT ANSWER✔✔- calculates the proportion of net profits to
sales; a low proportion can indicate a bloated cost structure or pricing pressure
, Return on Assets - CORRECT ANSWER✔✔- calculates the ability of management to
efficiently use assets to generate profits. A low return indicates a bloated asset base or poor
sales
Return on Equity - CORRECT ANSWER✔✔- measure of financial performance. Can be
thought of as a return on net assets (difference is a multiple of the financial leverage created
using debt financing)
Benchmarking - CORRECT ANSWER✔✔- compares processes and performance with
internal and external benchmarks. Then best practices are identified to meet improvement
targets
Business Level Strategy - CORRECT ANSWER✔✔- single product market - focus on
competitive advantage; used to obtain a customer base and sell a product at market
Corporate Level Strategy - CORRECT ANSWER✔✔- multiple industries and markets
simultaneously - focus on firm scope and resource allocation
Stability Strategy - CORRECT ANSWER✔✔- a strategy that is characterized by an absence
of significant change - maintain the status quo
Renewal Strategy - CORRECT ANSWER✔✔- a strategy characteristic of a company that is
reducing its size, usually in an environment of decline (retrenchment or turnaround)
Growth Strategy - CORRECT ANSWER✔✔- a strategy in which the business expands the
number of industries or market geographies served; or expands the number of
products/services offered in either its current market or new markets
Concentration - CORRECT ANSWER✔✔- a firm focuses on a single market or product -
allows the company to invest more resources in production and marketing in that one area
Vertical Integration - CORRECT ANSWER✔✔- a firm acquires business operations within
the same production vertical. Can be forward or backward in nature. Firm owns multiple
stages in the industry value chain
CORRECT Answers
Days Sales Outstanding - CORRECT ANSWER✔✔- determines the ability of a business to
effectively issue credit to customers and be paid back on a timely basis. Can be an indicator
of product quality issues or taking on bad credit risks
Inventory Turnover - CORRECT ANSWER✔✔- calculates the time it takes to sell off
inventory. Low ratio indicates a business has excessive investment in inventory and is at risk
of having obsolete inventory
Asset Turnover - CORRECT ANSWER✔✔- measures the value of a company's sales or
revenues relative to the value of its assets. Used as a measure of efficiency with which the
company generates revenue
Current Ratio - CORRECT ANSWER✔✔- compares current assets to current liabilities to
see if a business has enough cash to pay its immediate liabilities. Ratio less than 2 indicates
liquidity risk
Quick Ratio - CORRECT ANSWER✔✔- measures the level of the most liquid current assets
available to cover current liabilities. Excludes inventory and pre-paid expenses b/c less liquid.
Higher ratio means better liquid position
Debt to Equity Ratio - CORRECT ANSWER✔✔- compares the proportion of debt to equity
to see if a business has taken on too much debt
Gross Margin - CORRECT ANSWER✔✔- calculates the proportion of earnings generated by
the sale of goods or services before admin and other non-product costs are excluded (decline
could indicate pricing pressures on core operations)
Net Profit Margin - CORRECT ANSWER✔✔- calculates the proportion of net profits to
sales; a low proportion can indicate a bloated cost structure or pricing pressure
, Return on Assets - CORRECT ANSWER✔✔- calculates the ability of management to
efficiently use assets to generate profits. A low return indicates a bloated asset base or poor
sales
Return on Equity - CORRECT ANSWER✔✔- measure of financial performance. Can be
thought of as a return on net assets (difference is a multiple of the financial leverage created
using debt financing)
Benchmarking - CORRECT ANSWER✔✔- compares processes and performance with
internal and external benchmarks. Then best practices are identified to meet improvement
targets
Business Level Strategy - CORRECT ANSWER✔✔- single product market - focus on
competitive advantage; used to obtain a customer base and sell a product at market
Corporate Level Strategy - CORRECT ANSWER✔✔- multiple industries and markets
simultaneously - focus on firm scope and resource allocation
Stability Strategy - CORRECT ANSWER✔✔- a strategy that is characterized by an absence
of significant change - maintain the status quo
Renewal Strategy - CORRECT ANSWER✔✔- a strategy characteristic of a company that is
reducing its size, usually in an environment of decline (retrenchment or turnaround)
Growth Strategy - CORRECT ANSWER✔✔- a strategy in which the business expands the
number of industries or market geographies served; or expands the number of
products/services offered in either its current market or new markets
Concentration - CORRECT ANSWER✔✔- a firm focuses on a single market or product -
allows the company to invest more resources in production and marketing in that one area
Vertical Integration - CORRECT ANSWER✔✔- a firm acquires business operations within
the same production vertical. Can be forward or backward in nature. Firm owns multiple
stages in the industry value chain
