Economic measures of competitive advantage
9 important questions on Economic measures of competitive advantage
What are the advantages and disadvantages of account measures of competitive advantage?
- Easy to compute
- Firms publicly share accounting statements
- Cost of capital often excluded
- Incomplete performance view
How is cost of capital defined in a firm?
- Represents the rate of return promised to capital suppliers.
- Induces them to invest in the firm.
What are the two primary sources of capital?
- From banks and bondholders
- - Cost is the interest to debt holders
- From stock purchasers
- - Cost is the promised return to equity holders
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I always thought I studied well. My grades were fine. I could never have imagined that applying these study skills would have such a huge and direct impact on my grades, my speed and the pleasure I have in learning.
For the first time, I finally feel totally confident about the way I learn. I have the perfect overview and make great progress in terms of speed and the grades I get. Thanks, Chris!
I immediately started to enjoy learning again, and my grades soared. All of a sudden, everything went better. I highly recommend Study Smart to all students..
Being able to create my materials online made the process of studying so much smoother and quicker. I no longer have to spend a huge amount of my time on creating my summaries.
At first, my notes were a mess. Now I use Study Smart to take my notes in a perfectly structured way. It helps me to save a lot of time and do other things I enjoy.
Students that study with Study Smart get better grades. The system applies all the learning methods in such a way that both well-performing students and students who struggle perform much better.
Hi Chris, I would like to thank you very much. Last year I scored C on a course, and this year I got an A+ thanks to your method! Thank you very much!
The largest effect is that my child is more enthusiastic about school! Every parent wants their children to be happy at school, Study Smart made it happen.
In high school, I failed several exams, and that has really changed now. I actually needed this tool very much back then. Since I started studying with StudySmart, I haven't had any D's. My average score is now an A and those are results I would have never had in the past
With my old method, I passed only 3 out of 8 courses. Since I started taking my notes digitally in Study Smart, I have passed all my courses on the first try. For me, StudySmart takes away the stress of wondering if I will pass or not.
Thanks to StudySmart, I passed all my exams, and with better grades than before! On top of that, I have mastered a very good study method now, which I am confident will help me earn my degree.
For my 1st exam I got a C. Then, I started looking for ways to learn better and I came across Study Smart. Since then I have scored a A+, A, A- and another A. I highly recommend it to everyone who wants to hear it. I am so happy with it!!
I was struggling to finish all my first-year subjects for 3 years. Then I discovered Study Smart, which helped me to finish all of them within 3 months.
Because of StudySmart, things are going well in many ways. Before, I always had study stress and no time for anything. Now I feel calm and confident (because of the program). I used to score a B, now I usually score an A or A+.
Hey Chris, I really want to thank you very much for developing the platform, I usually got around C for my exams, now I scored an A+, an A and a A- !!
Since using Study Smart, my average has increased significantly. I even completed a statistics course with a A+ while I'm bad at statistics. I took on extra courses this year, because of Study Smart. Thanks so much!
Ever since I started studying with StudySmart I passed all my exams !!! No more re-sits!! At first, I was happy with a pass and now I only get good grades. Many thanks!
I aced all the courses I studied with Study Smart. For law, I first scored a D, and now an A! I’m 100% sure that I’ll pass all the courses I study with Study Smart.
I always thought I studied well. My grades were fine. I could never have imagined that applying these study skills would have such a huge and direct impact on my grades, my speed and the pleasure I have in learning.
For the first time, I finally feel totally confident about the way I learn. I have the perfect overview and make great progress in terms of speed and the grades I get. Thanks, Chris!
How is the cost of debt characterized?
- It equals the interest required by debt holders.
- Required to convince them to lend money to the firm.
What does cost of equity represent?
- It denotes the return rate promised to equity holders.
- Required to attract individuals and institutions to invest.
What is WACC and what does it indicate about a firm's capital?
- Equity × Cost of equity
- WACC < ROA < Industry Avg. ROA
- Can indicate competitive advantage or disadvantage
What are the types of economic performance based on a firm's cost of capital?
- ABOVE NORMAL ECONOMIC PERFORMANCE - earns more than cost of capital, likely has competitive advantage
- NORMAL ECONOMIC PERFORMANCE - earns exactly the cost of capital, achieves competitive parity
- BELOW NORMAL ECONOMIC PERFORMANCE - earns less, leading to competitive disadvantage
What are the advantages and disadvantages of measuring a firm’s performance relative to its cost of capital?
- Satisfying stakeholders (debt and equity holders)
Disadvantages include:
- Difficulty in calculating cost of capital, especially for privately held firms
- May need to use accounting ratios
How does the performance of a firm relate to its stakeholders?
- If a firm earns its cost of capital, it satisfies both debt holders and equity holders
- A firm's ability to attract additional capital depends on its performance relative to cost of capital
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