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CMA Part 2 > SU 9: Decision Analysis & Risk Mgmt > Flashcards

SU 9: Decision Analysis & Risk Mgmt Flashcards

1
Q

Price Elasticity of Demand

A

Percentage change in quantity demanded/Percentage change in price

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2
Q

Demand Elasticity Coefficient (>1)

A

Demand is in a relatively elastic range. A price decrease will cause an increase in total revenue

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3
Q

Demand Elasticity Coefficient (=1)

A

Demand has unitary elasticity

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4
Q

Demand Elasticity Coefficient (<1)

A

Demand is in a relatively inelastic range. A price increase will result in little or no decline in the amount demanded

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5
Q

Demand Elasticity Coefficient (Infinite)

A

Demand is perfectly elastic

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6
Q

Demand Elasticity Coefficient (=0)

A

Demand is perfectly inelastic

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7
Q

Peak-Load Pricing

A

Prices vary directly with capacity usage (i.e. Public utilities)

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8
Q

Cartel

A

A collusive oligopoly. Its effects are similar to those of a monopoly. Each firm will restrict output, charge a higher price, and earn maximum profit.

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9
Q

Competition-Based Pricing

A

Going-rate or Sealed-bid pricing

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10
Q

Price Skimming

A

The practice of setting an introductory price relatively high to attract buyers who are not concerned about price and to recover R&D costs

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11
Q

Penetration Pricing

A

The practice of setting an introductory price relatively low to gain deep market penetration quickly

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12
Q

Discriminatory Pricing

A

Adjusts for differences among customers, the forms of a product or locations

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13
Q

Value Pricing

A

Entails redesigning products to improve quality without raising prices or offering the same quality at lower prices

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14
Q

Product-Line Pricing

A

Sets price steps among the products in the line based on costs, consumer perceptions, and competitor’s prices

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15
Q

Optional-Product Pricing

A

Requires the firm to choose which products to offer as accessories and which as standard features to a main product

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16
Q

Captive-Product Pricing

A

Involves products that must be used with a main product (i.e. razor blades with a razor)

17
Q

By-Product Pricing

A

Usually sets prices at any amount in excess of storing and delivering by-products

18
Q

Product-Bundle Pricing

A

Entails selling combinations of products at a price lower than the combined prices of the individual items

19
Q

Cost-Based Pricing

A

Begins with a cost determination followed by setting a price that will recover the value chain costs and provide the desired return on investment

20
Q

Value-added Costs

A

Costs of activities that cannot be eliminated without reducing the quality, responsiveness, or quantity of the output required by a customer

21
Q

Locked-in Costs

A

Will result in use of resources in the future as a result of past decisions

22
Q

Target Pricing

A

The expected market price for a product or service, given the company’s knowledge of its consumers’ perceptions of value and competitors’ responeses

23
Q

Market-Based Pricing

A

Involves basing prices on the product’s perceived value and competitor’s actions rather than on the seller’s cost

24
Q

Promotional Pricing

A

Temporarily reduces prices below list or even cost to stimulate sales

25
Q

Hazard Risks

A

Risks that are insurable. (i.e. - natural disasters, the incapacity or death of senior officers, sabotage, and terrorism).

26
Q

Operational Risks

A

The risks related to the enterprise’s ongoing, everyday operations

27
Q

Financial Risks

A

Encompasses interest-rate risk, exchange-rate risk, commodity risk, credit risk, liquidity risk, and market risk

28
Q

Strategic Risks

A

Global economic risk, political risk, and regulatory risk

29
Q

Risk Avoidance

A

Brining to an end the activity from which the risk arises

30
Q

Risk Retention

A

The acceptance of the risk of an activity by the organization (Self insurance)

31
Q

Risk Reduction

A

The act of lowering the level of risk associated with an activity

32
Q

Risk Sharing

A

The offloading of some loss potential to another party

33
Q

Risk Exploitation

A

The deliberate courting of risk in order to pursue a high return on investment

34
Q

Residual Risk

A

The risk of an activity remaining after the effects of any avoidance, sharing, or mitigation strategies.

35
Q

Inherent Risk

A

The risk of an activity that arises from the activity itself.

36
Q

Risk Management Process

A

1) Identify risks
2) Assess risks
3) Prioritize risks
4) Formulate risk responses
5) Monitor risk responses

37
Q

Risk Appetite

A

The degree of willingness of upper management to accept risk is termed the organization’s risk appetite

38
Q

Uniform delivered pricing

A

The company charges the same price, inclusive of shipping costs, to all customers regardless of their location

CMA Part 2 (10 decks)

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