Financial Mktg and Mgmt Midterm

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Regardless of the size of the coupon payment, the price of a bond moves in the opposite direction from interest rate movements. For example, if interest rates rise, bond prices fall. True or False?

True

Restrictive Covenants are Designed so as to protect both the bondholder and the issuer even though they may constrain the actions of the firm's managers. Such covenants are contained in the bond's indenture. True or False?

True

A bond's value will increase as interest rates rise over time. True or False?

False

If you buy a bond that is selling for LESS THAN its face, or maturity, value then the price of the bond will increase as the maturity date nears if market interest rates DO NOT CHANGE during the life of the bond. True or False?

True

The terms and conditions to which a bond is subject are set forth in its
a. Debenture.
b. Underwriting agreement.
c. Indenture.
d. Restrictive covenants.
e. Call provision.

C. Indenture

Other things held constant, if a bond indenture contains a call provision, the yield to maturity that would exist without such a call provision will generally be ________ the YTM with it.
a. Higher than
b. Lower than
c. The same as
d. Either higher or lower, depending on the level of call premium, than
e. Unrelated to

B. Lower than

A contract negotiated directly with a bank in which the borrower agrees to make a series of interest and principal payments on specific dates to the bank is called
a. preferred stock.
b. commercial paper.
c. convertible debt.
d. a term loan.
e. a bond issue.

D. a term loan

A bond differs from term loans in that
a. a bond issue is generally advertised.
b. a bond is sold to many investors.
c. a bond is offered to the public.
d. All of the above.
e. None of the above.

D. All of the above

11. Which of the following types of debt are backed by some form of specific property?
a. Debenture.
b. Mortgage bond.
c. Subordinated debt.
d. All of the above.
e. None of the above.

B. Mortgage Bond

12. Bonds that can be exchanged for shares of equity at the owner's discretion are called what?
a. Debenture.
b. Indenture.
c. Callable bond
d. Convertible bond.
e. Putable bond.

D. Convertible Bond

13. A bond that can be redeemed for cash at the bondholder's option is called what?
a. Convertible bond.
b. Putable bond.
c. Callable bond.
d. Debenture.
e. Income bond.

B. Putable Bond

14. Which of the following events would make it less likely that a company would choose to call its outstanding callable bonds?
a. Increase in interest rates.
b. Decrease in interest rates.
c. Increase in price of outstanding convertible bonds.
d. A decrease in call premium.
e. Answers b and c only.

B. Decrease in interest rates

15. __________ are high-risk, high-yield bonds used to finance mergers, leveraged buyouts, and troubled companies.
a. Callable bonds
b. Junk bonds
c. Convertible bonds
d. Floating rate bonds
e. Putable bonds

B. Junk Bonds

16. Which of the following ratings by Moody's represent bonds that are at least investment grade?
a. Caa
b. Baa
c. B
d. Ba
e. None of the above.

B. Baa

17. Which of the following securities is the riskiest to investors?
a. Floating rate notes.
b. Income bonds.
c. Treasury bills.
d. First mortgage bonds.
e. Common stock.

E. Common Stock

1. American depository receipts (ADRs) are foreign stocks listed on a domestic exchange. True or False?

False

2. Founders' shares is a type of classified stock where the shares are owned by the firm's founders and they retain the sole voting rights to those shares but have restricted dividends for a specified time period.

True

3. A publicly owned corporation is simply a company whose shares are held by the investing public, which may include other corporations and institutions.

True

4. After a new issue is brought to market it is the marginal investor who determines the price at which the stock will trade.

False

5. A stock's par value is equal to the market value of the stock on the last day of the fiscal year for a firm.

False

6. The book value per share is computed by taking the sum of common stock, additional paid in capital, and retained earnings and dividing the number by the number of shares outstanding.

True

7. A proxy fight is an attempt by a group to gain control of a firm by convincing its stockholders to give the group the authority to vote their shares in order to elect a new management team.

True

8. One advantage of using common stock as a source of funds is that common stock does not legally obligate the firm to make payments to stockholders.

True

1. The net income that firm earns can either be paid out to shareholders as __________ or can be reinvested in the company as __________.
a. interest; additional paid-in capital
b. dividends; retained earnings
c. shares; capital stock.
d. capital gains; additional paid-in capital
e. interest; retained earnings

B. Dividends; Retained Earnings

In international markets, excluding stocks sold in the United States, what is any stock that is traded in a country other than the issuing company's home country called?
a. ADRs
b. Yankee stock
c. Euro stock
d. Class A stock
e. Preferred stock

C. Euro Stock

. Shareholders exert control of the management of the firm by
a. electing board members who can replace management.
b. directly replacing management with themselves.
c. buying shares in an IPO at a discounted price.
d. running the daily operations of the firm.
e. None of the above.

A. Electing board members who can replace management.

4. Stock owned by the organizers of the firm who have sole voting rights is
a. preferred stock.
b. common equity.
c. founders' shares.
d. convertible equity.
e. retained earnings.

C. Founders' Shares

5. Certificates representing ownership in stocks of foreign companies, which are held in a trust bank located in the country the stock is traded are called __________.
a. Certificates of Ownership
b. Foreign Stock Funds
c. Mutual Funds
d. American Depository Receipts
e. Investment Bankers

D. American Depository Receipts

Positioning involves two of the marketing mix variables.

False

8. Perceptual maps allow managers to see graphical depictions of where their brands are, and where their competitors are, in the minds of their customers.

True

9. Holes in perceptual maps identify areas of fierce competition among an industry's firms.

False

Low prices always result in low profitability.

False

20. Three basic corporate strategies to creating value and achieving market stature are operational excellence, product leadership, and customer intimacy.

True

21. Joe's company prides itself on efficient production and delivery of products, in addition to offering low prices and convenience to its customers. The strategy most likely being employed by Joe's company is Product Leadership.

False

The three basic corporate strategies to creating value and achieving market stature were originally described by Michael Treacy and Fred Wiersema in The Discipline of Market Leaders.

True

29. A positioning statement includes the specification of the target segment(s).

True

40. FedEx has a very straightforward positioning statement: "Dependable Solutions for Your Shipping Needs."

True

2. Positioning is mostly about ________.
a. identity
b. physical elements
c. targeting
d. advertising

A. Identity

3. Shannon is struggling to communicate who Company ABC is compared to the competition. Shannon wants to communicate that Company ABC's brand has the benefits that the target market will value. Shannon is engaged in what marketing activity?
a. segmenting
b. targeting
c. positioning
d. advertising

C. Positioning

Positioning involves which of the marketing mix variables?
a. Price, Promotion, Product, Place
b. Price, Promotion, Product
c. Price, Place
d. Promotion, Product, Place

A. Price, Promotion, Product, Place

18. Operational excellence refers to companies that ________.
a. are good at production, delivery, price, and convenience
b. pride themselves on quality and innovation
c. are willing to tailor their products to particular customer needs
d. are expensive but is expected to pay off in long-term loyalty and enhanced customer lifetime value

A. Are good at production, delivery, price, and convenience

19. Product leadership refers to companies that ______.
a. are good at production and delivery, and price and convenience
b. are expensive but is expected to pay off in long-term loyalty and enhanced customer lifetime value
c. pride themselves on quality and innovation
d. are willing to tailor their products to particular customer needs

C. Pride themselves on quality and innovation

20. Customer intimacy refers to companies that ______.
a. pride themselves on quality and innovation
b. are willing to tailor their products to particular customer needs
c. target and position themselves high in the market
d. are good at production and delivery, and price and convenience

B. Are willing to tailor their products to particular customer needs

22. Which of these companies uses a strategy of operational excellence?
a. Johnson & Johnson
b. Costco
c. Sony
d. Home Depot

B. Costco

Which of these companies uses a strategy of customer intimacy?
a. Dell
b. Sony
c. Costco
d. Home Depot

D. Home Depot

24. Which of these companies uses a product leadership strategy?
a. Johnson & Johnson
b. Walmart
c. Southwest Airlines
d. Nordstrom

A. Johnson & Johnson

Nordstrom uses which of the following strategies?
a. customer intimacy
b. product leadership
c. operational excellence
d. quality placement

A. Customer intimacy

36. To write a positioning statement, you should answer all of the following questions EXCEPT:
a. Who are you trying to persuade?
b. Who are you competing with?
c. How are you better?
d. What are your weaknesses?

D. What are your weaknesses?

1. All marketing managers have the same goal: to understand and please their customers.

True

2. We learn of and discuss product, price, place, and promotion separately because there are many details to consider for each element.

True

3. The execution of the 4Ps is flexible—only one piece needs to be in place and sending a consistent message for the overall product to be attractive to the customer.

False

When drivers purchase cars that are highly rated for their safety, the essential product is safety and the modifier is the actual car.

False

5. The word product can only be defined as a general term that includes services and goods.

False

6. Some customers will seek value and low prices, while others seek top quality.

True

7. Ideally, a company will have a clear differentiation strategy, because commodity products cannot be sustained as a competitive advantage.

True

8. Goods and services are totally distinct from each other.

False

9. Search qualities are the attributes that are evaluated before purchase, while the customer learns about competitive offerings.

True

How do you get INT in the bond value equation?

Coupon rate times par value

Goods are dominated by credence and experience qualities, and services are mostly comprised of experience and search qualities.

False

11. The inseparability of service production and consumption inevitably results in less perishable services.

False

12. The interaction between the crowd and the actors during a Broadway show is due to the inseparability between service provider and customer.

True

The service marketing exchange happens between a customer and a service provider representing the company.

True

14. Good variability involves the customization and tailoring of the service delivery for the customer's unique needs.

True

15. Professional services, purchase experiences, and online shopping are some purchases that might be further along the intangibility dimensions than goods or services.

True

It's important that brand managers focus on defining competition narrowly, as when we compute market shares.

False

17. Supervising product line managers' responsibilities are to focus, and brand manager's responsibilities are to oversee entire portfolios.

False

18. Company A offers a line of products to a single segment. Company B offers multiple products to multiple segments. Company B will most likely outperform company A.

False

For someone buying a Volvo, the essential product is _____, and the modifier is_____.
a. a car; safety
b. transportation; a car
c. a car; a innovative design
d. a high-end vehicle; transportation

A. A car; safety

2. Marianne is shopping for a new car. Which of the 4Ps is most central to her purchase?
a. price
b. promotion
c. place
d. product

D. Product

Orbitz offers low-price tickets on flights because ______.
a. they are in competition with airlines
b. it is something that benefits customers
c. they accept a low margin
d. their business model is based on promotions

B. It is something that benefits customers

4. Which of the following is a question that arises during the marketing exchange?
a. What is it that customers want?
b. Should the product be made in house or outsourced?
c. When should we sell our stock?
d. Should we acquire our competitor?

A. What is it that customers want?

Marketer 1 is marketing soft pretzels. Marketer 2 is marketing for a local amusement park. Why might their strategies differ?
a. They don't, their strategies would be the same.
b. Marketer 1 has a tangible product, white marketer 2 has an intangible product.
c. Marketer 1 would focus more on price than marketer 2.
d. Marketer 2 would focus more on promotion than marketer 1.

B. Marketer 1 has a tangible product, while marketer 2 has an intangible product

9. Which of the following is an example of "experience marketing"?
a. Starbucks
b. Cirque du Soleil
c. financial services
d. clothing

B. Cirque du Soleil

______ qualities are those attributes that may be evaluated prior to purchase, as the customer learns about the competitive offerings.
a. Credence
b. Experience
c. Search
d. Product

C. Search

12. The color of a pair of socks is an example of a ______ quality.
a. credence
b. experience
c. search
d. product

C. Search

Doctor's services consist mainly of ______ elements.
a. product
b. search
c. experience
d. credence

D. Credence

18. An example of a complex good is a car and an example of a simple service is ______.
a. architect
b. accountant
c. hotel
d. doctor

C. Hotel

The inseparability of production and consumption also impacts the interaction between the
_______ and the ________.
a. service provider; customer
b. service provider; manufacturer
c. variability; customer
d. variability; manufacturer

A. Service Provider; customer

23. Services are said to be more ______ than goods.
a. durable
b. tangible
c. inseparable
d. variable

D. Variable

Self-service is advancing in many industries wherein a _____ interacts with _____.
a. customer; a customer service rep
b. service provider; the manufacturer
c. customer; technology
d. manufacturer; technology

C. Customer; technology

29. What does good variability consists of?
a. Errors in the system, logistics, human resources and marketers want to reduce this variability.
b. The customization and tailoring of the service delivery for the customer's unique needs.
c. A service provider representing the company.
d. Advancing in many industries wherein a customer interacts with technology, banking, airport check-in, etc.

B. The customization and tailoring of the service delivery for the customer's unique needs

The central element of what is purchased is called the "core," and anything bought on top of that is called what?
a. promotions
b. goods
c. value addeds
d. extras

C. Value addeds

38. A _____ is comprised of several product lines that can vary in breadth and depth.
a. product mix
b. marketing mix
c. company
d. service

A. Product Mix

Marketers believe that brands such as Coca-Cola, Gap, and Ford have value above and beyond the benefits of the products themselves.

True

3. A brand usually begins with inherent meaning.

False

4. Logos are shapes and symbols that may begin with little inherent meaning, but are associated with the brand.

True

Brand names must have an inherent meaning.

False

9. William is starting an advertising agency and is considering several names for his agency. In choosing a brand name (i.e., company name), it should convey information about the benefits of the brand rather than simply representing the name of the person founding the brand.

True

10. The meaning of a brand name is built over time.

True

Jasmine is a senior executive of a very successful 100-year old company. Some younger employees in the marketing department want to update the company's logo, but Jasmine and other senior executives feel that a company lucky enough to survive for decades does not have to change or modify its logo. The executives are correct in their assessment.

False

15. Customers who participate in repeat purchasing are willing to pay premium prices for the brands they value.

True

18. A brand carries a promise that it can help customers achieve the persona to which they aspire.

True

A line extension is where a brand name is applied across different kinds of products.

False

31. An example of umbrella branding is Costco selling Starbucks coffee.

False

32. Ingredient branding is the primary form of line extension in which one company and its product are the primary host and another company and its product add value to the host product.

False

Which is not a quality associated with the brand name under the company's control?
a. product shape
b. customer feedback
c. packaging
d. logo

B. Customer Feedback

4. Which is not true about firms and brands named after the founder?
a. They tend to have no inherent meaning.
b. They show little creativity in marketing.
c. Customers can easily identify the name and products.
d. They serve primarily as an ego trip for the founders.

C. Customers can easily identify the name and products

Companies who survive for decades need to _____ their logos.
a. colorize
b. keep
c. adapt
d. simplify

C. Adapt

8. Nancy is considering whether her toy manufacturing business should develop its own brand. Which is a company reward Nancy can expect from branding?
a. Brands enhance loyalty.
b. Brands confer status.
c. Brands signal consistent quality.
d. Brands convey information.

A. Brands enhance loyalty

Anne and Joseph lead the product development team for a national GPS system manufacturer. In reviewing customer satisfaction survey results, they find that product reliability is one of their customers' biggest complaints. From a marketing perspective, reliability in a product means ______.
a. it is expensive to own one
b. the product will perform to quality standards
c. the prestige of the product bolsters the consumers self-image
d. maintenance and repair costs are high

B. The product will perform to quality standards

10. Scott, a young professional, buys a new BMW. Scott's new BMW is an example of ______.
a. a status symbol
b. a market segment
c. paying a premium price
d. predictability in quality

A. a status symbol

Mac user groups are an example of _____.
a. a brand community
b. an emotional connection
c. free advertising
d. personal benefits

A. a brand community

18. One way marketers get customers to relate to brands is by creating a brand _______, such as Apple's classification as "exciting" or how Gillette is action oriented.
a. spokesperson
b. image
c. personality
d. awareness

C. personality

Which is not an example of a company using an umbrella branding approach?
a. Honda's cars, motorcycles and lawn mowers
b. Masterfoods has many major brands including Mars and Pedigree Chum
c. Canon's cameras and copiers
d. Nike makes shoes, clothes and gym bags

B. Masterfoods has many major brands including Mars and Pedigree Chum

24. Which is not an example of brand extensions?
a. Pepsi offers new flavors
b. Titleist outerwear advertises that it uses Goretex in its jackets
c. QuickBooks has its basic software, a version for Macs, another for small business needs, and premier packets for professionals, nonprofits, retailers
d. L'Occitane offers bubble bath and moisturizer lotions

B. Titleist outerwear advertises that is uses Gortex in its jackets

Which is an example of co-branding?
a. Krispy Kreme gets a new donut flavor
b. Nike offers golf balls as part of its golf line
c. QuickBooks has its basic software, a version for Macs, another for small business needs, and premier packets for professionals, nonprofits, retailers
d. Brembo brakes are in Aston Martins

D. Brembo brakes are in Aston Martins

In order to best value a brand, how should it be measured?
a. according to popularity
b. by using focus groups
c. by using a market survey
d. by using means that best translates into a financial vocabulary

D. by using means that best translates into financial vocabulary

Which of the following is the Interbrand formula to asses the value of a brand?
a. value of firm minus physical and financial assets
b. price of brand minus packaging cost
c. tangible value minus intangible value
d. value of firm minus administrative costs

A. value of the firm minus physical and financial assets

Strong brands _____.
a. are a liability
b. deliver greater returns with less risk
c. guarantee success for a company
d. are the most significant barrier to entry in the market

B. Deliver greater returns with less risk

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