Question #7

Reading: Reading 19 Equity Valuation - Applications and Processes

PDF File: Reading 19 Equity Valuation - Applications and Processes.pdf

Page: 4

Status: Incorrect

Correct Answer: C

Your Answer: B

Part of Context Group: Q6-7
Shared Context
- In response to Heller's point regarding the Linpan discussion in Article Two, which of the following correctly identifies the suggested valuation method? A) Going Concern Valuation. B) Liquidation Value. C) Orderly Liquidation Value.
Question
Which of the following would not be an example of one of Michael Porter's 5 competitive forces applicable to Toys to You?
Answer Choices:
A. A new chain of toy stores, Games & Goodies, has opened up in key Toys to You territories
B. Toys to You’s biggest supplier have ‘due to unforeseen market conditions’ added a 15% premium to key product lines
C. Due to cash flow issues Toys to You have been forced to halve the marketing and advertising budget compared to the previous financial year
Explanation
Porter's Five Forces include risk of new entrants (A), supplier power (B), customer power, established rivals, and the risk of substitute offerings. Marketing and advertising budgetary constraints are not relevant.
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