DBA Doctor of Business Administration/Business Management 3 — Questions and Answers
Question 1: Which financial metric measures how efficiently a company converts sales into actual cash flow?
- Return on equity (ROE)
- Cash conversion cycle (CCC) (Correct answer)
- Price-to-earnings ratio
- Debt-to-equity ratio
Correct answer: Cash conversion cycle (CCC)
The cash conversion cycle measures days to convert inventory and receivables into cash, indicating operational liquidity efficiency.
Question 2: In agency theory, the 'principal-agent problem' arises primarily because:
- Shareholders and bondholders have conflicting interests
- Agents may pursue self-interest that diverges from principals' objectives (Correct answer)
- Regulators impose conflicting mandates on management
- Principals lack sufficient capital to fund operations
Correct answer: Agents may pursue self-interest that diverges from principals' objectives
Information asymmetry and differing incentives between principals (owners) and agents (managers) create misalignment and monitoring costs.
Question 3: The 'resource-based view' (RBV) of competitive advantage argues that sustained competitive advantage stems from:
- Industry positioning and market structure
- Valuable, rare, inimitable, and non-substitutable internal resources (Correct answer)
- Economies of scale in production
- Strategic alliances with industry leaders
Correct answer: Valuable, rare, inimitable, and non-substitutable internal resources
RBV, associated with Barney, holds that VRIN resources — valuable, rare, inimitable, non-substitutable — are the foundation of sustainable competitive advantage.
Question 4: In change management, Kotter's 8-step model begins with which critical first step?
- Building a guiding coalition
- Creating a vision for change
- Establishing a sense of urgency (Correct answer)
- Communicating the change vision
Correct answer: Establishing a sense of urgency
Kotter's model starts with creating urgency by helping stakeholders see the need for change and the risks of inaction.
Question 5: Which capital budgeting technique accounts for the time value of money AND provides a dollar-value measure of value created?
- Payback period
- Accounting rate of return
- Net present value (NPV) (Correct answer)
- Internal rate of return (IRR)
Correct answer: Net present value (NPV)
NPV discounts future cash flows to present value and subtracts the initial investment, directly measuring dollar-value wealth creation.
Question 6: In supply chain management, 'the bullwhip effect' refers to:
- Cost amplification when raw material prices fluctuate
- Demand variability that increases as orders move upstream in the supply chain (Correct answer)
- Quality defects that compound through multiple production stages
- Delivery delays caused by last-mile logistics inefficiencies
Correct answer: Demand variability that increases as orders move upstream in the supply chain
Small demand fluctuations at the retail level get amplified into large order swings at the manufacturer level due to forecasting and ordering behaviors.
Question 7: Which corporate governance mechanism most directly aligns executive interests with shareholder interests?
- Mandatory rotation of external auditors
- Performance-based equity compensation tied to long-term value (Correct answer)
- Separation of CEO and board chair roles
- Quarterly earnings guidance requirements
Correct answer: Performance-based equity compensation tied to long-term value
Long-term equity compensation (stock options, restricted shares) ties executive wealth to shareholder value, reducing the principal-agent gap.
DBA Doctor of Business Administration/Business Management 3
Which financial metric measures how efficiently a company converts sales into actual cash flow?