MBA 705 Exam 3 – Advanced Business
Administration Study Guide & Practice
Efforts directed toward improvements or innovations in the quality or uniqueness
of a company's outputs is known as
A. product R&D
B. process R&D.
C. product innovation.
D. structural reorganization. - -- answer --A. Innovation designed to improve
quality or uniqueness is known as product R&D.
Reducing operational costs by making the production process more efficient is
known as
A. total quality management
B. process R&D.
C. product innovation.
D. structural innovation. - -- answer --B. Process R&D seeks to reduce operational
costs and make them more efficient.
Which of the following is not a characteristic of the just-in-time (JIT) approach to
inventory?
,A. JIT is difficult on suppliers.
B. JIT reduces inventory costs.
C. JIT is less risky than traditional inventory approaches.
D. JIT is popular in Japan. - -- answer --C. A JIT system also makes a company
highly vulnerable to labor strikes and ecological disasters.
Functional Strategies - -- answer --}Functional strategies represent the lowest
strategy tier.
}The link between functional and business strategies is clear in many but not all
cases. The business strategy usually dictates what must be done within the
various functions.
}The key is integration. All functional strategies must blend together to support
the business strategy.
Marketing - -- answer --}Pricing: Low-cost businesses tend to emphasize low
prices. Price is less of a concern to differentiated businesses.
}Promotion: Low-cost businesses spend less on promotion and often emphasize
price. Differentiated businesses highlight the uniqueness of their products or
services.
}Product/Service: Low-cost businesses emphasize basic, no-frills products.
Differentiated businesses seek to distinguish their products from the competition.
}Place (Distribution): Low-cost businesses seek the most efficient means of
distribution. Differentiated businesses may emphasize quality or speed of
delivery.
, Finance - -- answer --}Low-cost businesses tend to minimize financial costs and
often defer expansion if the cost of capital is too high.
}Differentiated businesses tend to fund initiatives associated with quality
improvements and expansion even when the cost of capital is relatively high.
}Financial ratio analysis is part of the financial strategy process. Table 8-2
summarizes common ratios and their formulas. These ratios are summarized on
the following slides. The financial ratios for many large firms are readily available
on the Internet.
Financial Ratio Analysis- Liquidity Ratios - -- answer --}Current Ratio: Indicates
how much of the current liabilities the current assets can cover; ordinarily 2:1 or
better is desirable.
}Quick Ratio or Acid Test or Liquidity Test: Indicates how rapidly a business can
come up with cash on short notice. Not relevant for firms where inventory is
almost immediately convertible to cash (e.g., McDonald's).
Financial Ratio Analysis: Activity Ratios - -- answer --}Asset Turnover: Measures
how efficiently the company's total assets are being used to generate sales.
}Inventory Turnover: Indicates how many times inventory of finished goods is sold
per year.
}Sales-to-Working Capital: Measures how efficiently net working capital (current
assets - current liabilities) is used to generate sales.
Financial Ratio Analysis-Leverage Ratios - -- answer --}Debt-to-Asset: Indicates
the percentage that borrowed funds are utilized to finance the assets of the firm.
Administration Study Guide & Practice
Efforts directed toward improvements or innovations in the quality or uniqueness
of a company's outputs is known as
A. product R&D
B. process R&D.
C. product innovation.
D. structural reorganization. - -- answer --A. Innovation designed to improve
quality or uniqueness is known as product R&D.
Reducing operational costs by making the production process more efficient is
known as
A. total quality management
B. process R&D.
C. product innovation.
D. structural innovation. - -- answer --B. Process R&D seeks to reduce operational
costs and make them more efficient.
Which of the following is not a characteristic of the just-in-time (JIT) approach to
inventory?
,A. JIT is difficult on suppliers.
B. JIT reduces inventory costs.
C. JIT is less risky than traditional inventory approaches.
D. JIT is popular in Japan. - -- answer --C. A JIT system also makes a company
highly vulnerable to labor strikes and ecological disasters.
Functional Strategies - -- answer --}Functional strategies represent the lowest
strategy tier.
}The link between functional and business strategies is clear in many but not all
cases. The business strategy usually dictates what must be done within the
various functions.
}The key is integration. All functional strategies must blend together to support
the business strategy.
Marketing - -- answer --}Pricing: Low-cost businesses tend to emphasize low
prices. Price is less of a concern to differentiated businesses.
}Promotion: Low-cost businesses spend less on promotion and often emphasize
price. Differentiated businesses highlight the uniqueness of their products or
services.
}Product/Service: Low-cost businesses emphasize basic, no-frills products.
Differentiated businesses seek to distinguish their products from the competition.
}Place (Distribution): Low-cost businesses seek the most efficient means of
distribution. Differentiated businesses may emphasize quality or speed of
delivery.
, Finance - -- answer --}Low-cost businesses tend to minimize financial costs and
often defer expansion if the cost of capital is too high.
}Differentiated businesses tend to fund initiatives associated with quality
improvements and expansion even when the cost of capital is relatively high.
}Financial ratio analysis is part of the financial strategy process. Table 8-2
summarizes common ratios and their formulas. These ratios are summarized on
the following slides. The financial ratios for many large firms are readily available
on the Internet.
Financial Ratio Analysis- Liquidity Ratios - -- answer --}Current Ratio: Indicates
how much of the current liabilities the current assets can cover; ordinarily 2:1 or
better is desirable.
}Quick Ratio or Acid Test or Liquidity Test: Indicates how rapidly a business can
come up with cash on short notice. Not relevant for firms where inventory is
almost immediately convertible to cash (e.g., McDonald's).
Financial Ratio Analysis: Activity Ratios - -- answer --}Asset Turnover: Measures
how efficiently the company's total assets are being used to generate sales.
}Inventory Turnover: Indicates how many times inventory of finished goods is sold
per year.
}Sales-to-Working Capital: Measures how efficiently net working capital (current
assets - current liabilities) is used to generate sales.
Financial Ratio Analysis-Leverage Ratios - -- answer --}Debt-to-Asset: Indicates
the percentage that borrowed funds are utilized to finance the assets of the firm.
