Question

Western assembles computers in the owner’s garage from parts the owner orders over the Internet. This industry is characterized by low barriers to entry, including few operating licenses or governmental approvals, and small investments in productive equipment or facilities.
How would you expect this situation to affect the assessment of Northern's financial condition and performance?

a. Its low barriers to entry expose Northern to decreased risk of competition, which could improve the predictability of its expected future sales revenues.
b. Although nonquantitative factors may be relevant to a company's financial evaluation in general terms, the details of this specific situation are not relevant to the firm's financial condition or performance.
c. Its low barriers to entry expose Northern to increased risk of competition, which could negatively affect the predictability of its expected future sales revenues.

Answer 1

Answer:

c.  Its low barriers to entry expose Northern to increased risk of competition, which could negatively affect the predictability of its expected future sales revenues.