Reading Quiz Chapters 1 and 2 and the Competitive Advantage Reading

Please read chapter 1 and 2 in the valuation book and the competitive advantage reading. Then underline the correct answer for the true/false questions or type your answer in the space below the question for the short answer questions. Thanks.

(True or False). Accounting changes that do not increase cash flow should increase value.

(True or False) Competition tends to enhance the average firms competitive advantages and consequently increase the firms return on invested capital over time.

For the network effects to work, the company must have high or low marginal cost of additional production. Pick one and explain.

Do companies domiciled in Europe place the same emphasis on long term valuation as those domiciled in the United States? Please explain the difference.

Per the authors, should managers fixate on earnings per share? and do they?

YZ Company has a return on invested capital (ROIC) of 8% and a cost of capital of 10%. If XYZ retains additional earnings to grow faster what impact would this have on wealth?

ABC Company has a return on invested capital (ROIC) of 12% and a cost of capital of 10%. If ABC retains additional earnings to grow faster what impact would this have on wealth?

(True or False) To have a high ROIC a company must have a competitive advantage or be in the right industry.

(True or False) Procter and Gamble and Colgate Palmolive have higher Price Earnings (PE) ratios because they are high growth not high profit companies.

The ROICs for the median large US companies tend to be (higher or lower) than for the median large Asian company. Pick one.

Per the authors, companies with high ROICs will create more value it they (increase their ROIC or increase growth) Pick one.

Per the authors, companies with low ROICs will create more value it they (increase their ROIC or increase growth) Pick one.

Between (new products in existing markets, expanding existing markets, increasing share in a growing market, competing for share in a stable market, and acquiring a business) what creates the most value per dollar of investment? Pick one.

Between (new products in existing markets, expanding existing markets, increasing share in a growing market, competing for share in a stable market, and acquiring a business) what creates the least value per dollar of investment? Pick one.

(Give referene of all your answers)