Mixed Deck — All BEC Topics Flashcards

A key performance indicator (KPI) should be:

Answer: Specific, measurable, and directly tied to strategic objectives

Effective KPIs are specific, measurable, actionable metrics that are directly linked to strategic goals and reviewed regularly to track progress and drive accountability.

The weighted average cost of capital (WACC) represents:

Answer: The average rate a company must earn to satisfy all capital providers

WACC is the blended required rate of return weighted by the proportions of debt and equity in the capital structure, representing the minimum return the firm must earn on its assets.

The Theory of Constraints (TOC) recommends focusing improvement efforts on:

Answer: The binding constraint that limits the system's overall output

TOC states that a system's output is limited by its single binding constraint, so improvement efforts should focus on identifying and elevating that constraint before moving on to others.

The Consumer Price Index (CPI) primarily measures:

Answer: Changes in the price level of a basket of consumer goods and services

The CPI tracks changes in the price level of a fixed basket of goods and services typically purchased by urban consumers, serving as the primary inflation gauge.

Corporate social responsibility (CSR) in a business context means:

Answer: Companies integrating social and environmental concerns into operations beyond legal requirements

CSR refers to a company's voluntary commitment to operate ethically and contribute positively to society and the environment, beyond what is legally mandated.

The Modigliani-Miller theorem (without taxes) proposes that a firm's value is:

Answer: Independent of its capital structure

The Modigliani-Miller theorem states that in a perfect market without taxes, capital structure is irrelevant — the total firm value is unaffected by how it is financed.

A competitive advantage is considered 'sustainable' when it is:

Answer: Difficult for competitors to imitate, substitute, or replicate over time

A sustainable competitive advantage persists because it is rooted in capabilities or resources that are valuable, rare, costly to imitate, and not substitutable (the VRIN framework).

Activity-based costing (ABC) allocates overhead costs based on:

Answer: The actual activities that drive costs, traced to specific products or customers

ABC identifies cost drivers for each overhead activity and assigns costs to products or services based on their actual consumption of each activity, yielding more accurate product costing.

A company has fixed costs of $100,000, a variable cost ratio of 60%, and sales of $300,000. What is the operating income?

Answer: $20,000

Contribution margin = $300,000 × (1 - 0.60) = $120,000; Operating income = $120,000 - $100,000 fixed costs = $20,000.

A company uses a PESTEL analysis to evaluate which category of external factors?

Answer: Political, Economic, Social, Technological, Environmental, and Legal factors

PESTEL analysis is a strategic framework for scanning the macro-environment by systematically examining Political, Economic, Social, Technological, Environmental, and Legal factors that affect the organization.

A company's Internal Rate of Return (IRR) decision rule states: accept a project if:

Answer: IRR exceeds the required rate of return (hurdle rate)

The IRR decision rule holds that a project should be accepted when its IRR exceeds the company's required rate of return, indicating the project earns more than its cost of capital.

An entity successfully launching a profitable new product line represents:

Answer: Value creation

Value creation occurs when an entity's actions or strategies generate new benefits or opportunities, leading to an increase in its overall worth or utility. Successfully launching a profitable new product line directly contributes to value creation by generating new revenue streams, expanding market presence, and enhancing the company's financial health and competitive position. This process adds new economic benefit to the entity.

Monetary policy is conducted primarily by:

Answer: The Federal Reserve

In the United States, monetary policy — controlling the money supply and interest rates — is the responsibility of the Federal Reserve System.

When the Federal Reserve increases the federal funds rate, the most likely immediate effect on the economy is:

Answer: Decreased borrowing and reduced spending

Raising the federal funds rate makes borrowing more expensive, which reduces consumer and business spending, thereby slowing economic activity and curbing inflation.

Net Present Value (NPV) of a project is calculated as:

Answer: Present value of future cash inflows minus the initial investment

NPV equals the sum of discounted future cash inflows less the initial investment; a positive NPV indicates the project creates shareholder value.

Vertical integration as a corporate strategy involves:

Answer: A company expanding into supply chain stages it previously outsourced (upstream or downstream)

Vertical integration is a strategy where a company takes ownership of its supply chain — backward integration (acquiring suppliers) or forward integration (acquiring distribution channels).

The multiplier effect in economics refers to:

Answer: The magnified impact on total income from an initial change in spending

The multiplier effect describes how an initial change in spending (e.g., government expenditure) ripples through the economy to produce a larger total change in national income.

A data warehouse is primarily used for:

Answer: Storing large volumes of historical data for analytical reporting and decision-making

A data warehouse consolidates historical data from multiple sources into a centralized repository optimized for complex analytical queries and business intelligence reporting.

During a recessionary gap, actual GDP is:

Answer: Below potential GDP

A recessionary gap exists when the economy's actual output falls short of its potential (full-employment) output, indicating underutilized resources.

A company's current ratio is 1.8 and its quick ratio is 0.9. This difference most likely indicates:

Answer: The company holds a significant amount of inventory

The gap between the current ratio and quick ratio arises because the quick ratio excludes inventory; a large difference signals that inventory is a major component of current assets.