Chapter 16&18

Question 1

IMC

Answer 1

Integrated marketing communication

A technique that combines all the promotional tools into one comprehensive unified promotional strategy

Question 2

Trade advertising

Answer 2

Advertising to wholesalers and retailers by manufacturers to encourage them go carry their products

Question 3

Promotion mix

Answer 3

Combination of promotional tools an organization uses

• advertising
• personal selling
• public relations
• sales promotion
• product (if given free)

Question 4

Institutional advertising

Answer 4

Advertising designed to create an attractive image for an organization rather than product

Question 5

Advocacy advertising

Answer 5

Advertising that supports a particular view of an issue

Question 6

Viral marketing

Answer 6

Paying customers to day positive things on the internet to settling multilevel selling schemes whereby customers get commission for directing friend’s specific websites

Question 7

Pull strategy

Answer 7

Promotional strategy which heavy advertising and sales promotion efforts are directed to the costumers, so they will request the products from retailers. If the pull strategy works, customers will go to the store and ask for the products

Question 8

Push stragety

Answer 8

Promotional strategy in which producer used advertising, personal selling, sales promotion, and all other promotional tools to convince wholesalers and retailers to stock and sell merchandise. If push strategy works, customers will walk into the stores, see the product, and buy it.

Question 9

Pick economy

Answer 9

Customers who pick out their products from online outlets or who do online comparison shopping

Question 10

Three most common reasons a firm fails financially

Answer 10

1 undercapitalization
2 poor control over cash flow
3 inadequate expense control

Question 11

3 steps in finance planning

Answer 11

1. Forecasting financial needs
2. Developing budgets to meet those need
   -capital budget: spending plans asset purchases, large sum of money
   -cash budget: cash inflows and outflows
   -operational (master) budget: ties together the firm’s other budgets and summarizes its proposed financial activities
3. Establish financial controls
   Financial control: compares its actual revenues, costs and expenses with its budget

Question 12

Capital expenditures

Answer 12

Major investment in both tangible longterm assets such as land, buildings, and requirements or intangible assets as patents, trademarks, and copyright

Question 13

Equity financing

Answer 13

Money raised from within the firm, from operations or through the sale if ownership in the firm

Question 14

Short-term financing (7)

Answer 14

1. Trade credit, buy now pay later
   Promissory note, a written contract with a promise to pay a supplier a specific sum of money at a definite time
2. Family and friends
3. Commercial banks
4. Different forms of short-term loan
5. Factoring accounts receivable
   Factoring: the process of selling accounts receivable for cash, this is expensive and its not a loan
6. Commercial paper: unsecured promissory notes of $100,000 and up that mature in 270 days or less
7. Credit cards

Question 15

Different forms of short-term loan

5

Answer 15

• Secured loan: backed by collateral (property)
• Unsecured loan: a loan that doesn’t require any collateral
• Line of credit: given amount of unsecured short-term funds a bank will lend
• Revolving credit agreement: line of credit that’s guaranteed but usually come with a fee
• Commercial finance companies: organizations that make short-term loans to borrowers who offer tangible assets as collateral

Question 16

Obtaining long-term financing

Answer 16

1. Debt financing
2. Equity financing
3. Comparing debt and equity financing

Question 17

Debt financing

3

Answer 17

By borrow form lending institution:

• term-loan agreement: promissory note that requires the borrower to repay the loan in specified installment, advantage interest is tac deductible
• Risk/Return trade-off: principle that the greater the risk a lender takes in making a loan, the higher the interest rate requires

By issuing bonds:

• Indenture terms: term of agreement in bond
• Secured bond: bond issue with collateral
• unsecured: only back by reputation of issuer also called a debenture bond

Question 18

Equity financing

Answer 18

• selling stock
• retained earning, reinvest profit in firm
• venture capital: money that is invested in new or emerging companies that are perceived as having a great profit potential