Answer: Nepotism
Explanation: Nepotism is an act of granting special privileges to one's friends and family especially during
recruitment or any other opportunity. It entails using one's power to secure juicy opportunities for one's relatives, especially when they are not qualified for such opportunity. Nepotism is also an act of partiality in order to favour one's friends or relative or candidate over others.
The word "nepotism" is an Italian word and it advanced from the Italian word for nephew. It originated in the mid 17th century when popes and other religious leaders were in the habit of displaying favouritism towards their family members at the expenses of others.
Types of nepotism.
• Nepotism at work place or employment nepotism.
• Political nepotism.
• Organizational nepotism.
The condition which states that the domestic interest rate equals the foreign interest rate minus the expected appreciation of the domestic currency is called ______.
Answer:
The condition which states that the domestic interest rate equals the foreign interest rate minus the expected appreciation of the domestic currency is called Interest Rate parity
Explanation:
The interest rate parity condition explains the relationship between domestic and foreign interest rates, and also factoring in alongside the appreciation of the home or domestic currency.
Interest rate parity condition states that the difference in interest rate between two countries will be equal to the difference between their forward exchange rate and their spot exchange rate.
Therefore in very simple terms, interest rates are linked to exchange rates
Ming Chen began a professional practice on June 1 and plans to prepare financial statements at the end of each month. During June, Ming Chen (the owner) completed these transactions.Owner invested $61,000 cash in the company along with equipment that had a $22,000 market value in exchange for its common stock.The company paid $1,200 cash for rent of office space for the month.The company purchased $13,000 of additional equipment on credit (payment due within 30 days).The company completed work for a client and immediately collected the $2,300 cash earned.The company completed work for a client and sent a bill for $8,000 to be received within 30 days.The company purchased additional equipment for $6,200 cash.The company paid an assistant $2,400 cash as wages for the month.The company collected $4,300 cash as a partial payment for the amount owed by the client in transaction e.The company paid $13,000 cash to settle the liability created in transaction c.The company paid $1,200 cash in dividends to the owner (sole shareholder).Required:Enter the impact of each transaction on individual items of the accounting equation. (Enter decreases to account balances with a minus sign.)
Answer:
Please see below the computation for Assets = Liabilities + Equity.
Explanation:
(+) Cash $61,000
(-) Capital $61,000
(+) Equipment $22,000
(-) Common Stock $22,000
(+) Rent Expense $1,200
(-) Cash $1,200
(+) Equipment $13,000
(-) Accounts Payable $13,000
(+) Cash $2,300
(-) Services $2,300
(+) Accounts Receivables $8,000
(-) Services $8,000
(+) Equipment $6,200
(-) Cash $6,200
(+) Wages Expense $2,400
(-) Cash $2,400
(+) Cash $4,300
(-) Account Receivable $4,300
(+) Accounts Payable $13,000
(-) Cash $13,000
(+) Dividends $1,200
(-) Cash $1,200
Net Profit = Revenue - Expenses
Net Profit = $10,300 - $3,600
Net Profit = $6,700
Assets = Total Liabilities + Shareholders' Equity
Cash + Accounts Receivables + Equipment = Accounts Payable + Capital + Retained Earning + Common Stock - Dividends
$43,600 + $3,700 + $41,200 = $0 + $61,000 + $6,700 + 22,000 - $1,200
$88,500 = $88,500
Which of the following is a cognitive obstacle to communication in organizations?
a) Unclear purpose for communicating
b) Breakdowns across the organizational hierarchy
c) Sender preconceptions and assumptions
d) Sender is not credible
e) Status differences between sender and receiver
Answer:
B. Breakdowns across the organizational hierarchy
Explanation:
Breakdowns across the levels in organizations is a cognitive barrier to communication in organizations
Given what you know about regional differences in unemployment and the ability of people to now move freely between the former East and West German states, which scenario is most likely?
Answer:
gap in the standard of living that exist between the former East and West German states will continue to widen
Explanation:
Based on the information provided within the question it can be said that the most likely scenario would be that the gap in the standard of living that exist between the former East and West German states will continue to widen. This is due to the fact that people will migrate to locations with the most jobs. Thus causing one location to grow it's standard of living while the other shrinks.
Given that news organizations frequently call for more transparency from the government and organizations they cover, critics find it hypocritical that these same organizations do not want the same level of scrutiny regarding _____________ they receive from political campaigns.
Answer:
Revenues
Explanation:
The role of news organisations in political campaigns in recent times has been very significant.
Critics find it hypocritical because when paid to run political campaigns, news organisations do not reject lies by public officials, because they were paid for the air time.
For example, according to information from statistica, it estimates that more than 6 billion dollars were spent in the US Presidential elections campaign on broadcast TV in 2016.
Scrutiny would involve critical examination of the activities of this news organisations.
Interest earned on premiums paid to an insurer helps to ________ the premiums charged.
Answer:
Interest earned on premiums paid to an insurer helps to LOWER the premiums charged.
Explanation:
An insurance premium is the amount of money an individual or business pays for an insurance policy. Insurance premiums are paid for policies that cover healthcare, auto, home, life, and others.
Once earned, the premium is income for the insurance company. It also represents a liability, as the insurer must provide coverage for claims being made against the policy. Failure to pay the premium may result in the cancellation of the policy.
The interest earned on premiums helps to offset the premiums charged by insurance companies.
Explanation:The interest earned on premiums paid to an insurer helps to offset the premiums charged.
Insurance companies receive income from insurance premiums and investment income. They invest the funds they receive, earning a rate of return. This income can be used to offset the premiums charged to policyholders. By earning investment income, insurance companies can reduce the overall cost of insurance for their customers.
For example, if an insurance company charges $100 in premiums and earns $10 in interest income, they can use the interest income to reduce the premiums charged to $90, making insurance more affordable for policyholders.
An online retailer uses complex data-mining software to evaluate the preferences and buying habits of its customers and makes decisions based on these findings. This is an example of the use of ______ in the decision-making process.
Answer: Analytics
Explanation:
The online retailer is applying analytics to evaluate buyers preferences and habits: this information gotten influences the decisions made by the retailer.
Analytics in decision making process occurs when a manager in an organization carefully analyses systematic statistical data to make decisions in the organization.
The use of analytics in decision making helps reduce errors and enables the manager make accurate decisions.
1) are short-term funds transferred between financial institutions, usually for a period of one day
2) actually have nothing to do with the federal government
3) provide banks with an immediate infusion of reserves
Answer:
Federal funds
Explanation:
The 3 characteristics in the question are the characteristics of federal funds.
Federal funds are funds that bank and entities exchange between each other to maintain bank reserves at the federal reseeve as well as to meet daily transactions. It can be called an overnight borrowing because the funding can only be borrowed for one day and must be returned within such albeit with some rate. The current rate is 10percent.
Cheers.
A client of yours expresses interest in giving trading authority to a third party on their account held at your Investment Advisory firm. Regulations from the NASAA pertaining to this scenario require which of the following?
Answer and Explanation:
NASAA = North american Securities Administrators Association
NASAA would require written authority in order for trading as expressed by client to a third party. The written authority is very important according to the regulations by NASAA.
A company has a retention rate of 50%, sales of $25,000, beginning equity of $50,000 and profit margins of 10%, an asset turnover ratio of .75 and debt of $10,000. What is its sustainable growth rate?
Answer:
Sustainable Growth Rate: 2.5%
Explanation:
Sustainable growth rate is calculated by multiplying return on equity with retention ratio.
Logic behind above is that whatever portion of net profit is retained by the Company, is used in the Company's operations, which earns certain percentage of equity known as return on equity. By multiplying both return on equity with retention ratio, we assume that the practice will continue for foreseeable future and the Company will continue to grow at the calculated growth rate.
Growth rate = Retention ratio * return on equity
Retention ratio = 50%
Return on equity = Net profit available for distribution / Opening equity
Return on Equity = (25,000 * 10%) / 50,000
Return on Equity = 5%
Growth Rate = 5% * 50%
Growth Rate = 2.5%
The sustainable growth rate of the company is 3.75%.
Explanation:The sustainable growth rate of a company can be calculated by multiplying its retention rate, profit margin, and asset turnover ratio. The formula for sustainable growth rate is:
Sustainable Growth Rate = Retention Rate * Profit Margin * Asset Turnover Ratio
Using the given information, the company has a retention rate of 50% (0.5), profit margin of 10% (0.1), and asset turnover ratio of 0.75. Therefore, the sustainable growth rate is:
Sustainable Growth Rate = 0.5 * 0.1 * 0.75 = 0.0375 or 3.75%
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Sam Frank is a retired Army officer who wants to purchase a new home using a VA loan. In 2000, Sam used his VA guarantee of $36,000 when he purchased his current home. Based on the VA's maximum guarantee of $104,250 and his partial eligibility, how much of a loan can Sam get with no money down?
a) $68,250
b) $155,000
c) $208,500
d) $273,000
Answer:
D) $273,000
Explanation:
The VA's maximum guarantee for home purchases applicable for 2019 is $484,350, including additional benefits like no down payments and no private mortgage insurance.
Since Sam already used 34.45% of his benefit during 2000, he can only use 65.55% of his available benefit now. In current values that would equal around $317,000 but I guess this question is using values applicable during 2018, which would result in a maximum guarantee of $417,000, and 65.55% of that would be $273,000.
The amount of VA's loans increase year by year and also vary depending on certain states and counties.
The _____ directs managers to maximize profit and shareholder wealth and recognizes only legal limitations on the pursuit of profit.
Answer:
The economic model of corporate social responsibility (CSR)
Explanation:
The economic model of corporate social responsibility directs managers to maximize profit and shareholder wealth and recognizes only legal limitations on the pursuit of profit.
Final answer:
The profit maximization mandate directs managers to focus on increasing profit and shareholder wealth.
Explanation:
The statement in question suggests that the chief directive for managers is to maximize profit and shareholder wealth, within the bounds of legal constraints. This view highlights the classic economic model of a firm's objectives, emphasizing profitability as the primary goal.
It corresponds with the perspective of economist Milton Friedman, who famously argued that the only social responsibility of business is to use its resources in endeavors that enhance its profits, so long as it operates honestly and within the framework of free competition.
Managers are expected to prioritize shareholder interests, making decisions that will benefit stockholders, often at a short-term perspective. However, this framework also assumes that businesses must contend with market forces, which can include the potential for hostile takeovers if profit maximization is not achieved, essentially serving as a check on corporate efficiency and executive performance.
Moreover, while the onus is on businesses to maximize profits, they must also consider the broader impact of their actions. Exploiting customers, suppliers, or society can lead to long-term losses, either through a loss of trust or through government intervention and regulation. Thus, rational pursuit of maximal value for shareholders inherently respects other stakeholders to ensure sustainability and legitimacy over time.
Foreign education loans interest subsidies by government for low income families in andhra pradesh.
A) True
B) False
Answer:
True
Explanation:
Government of Andhra Pradesh have made substantial investments through providing Post-Matric Scholarships to SC students on a Saturation basis. This laudable initiative over the years has encouraged a large number of SC students to complete professional Courses and other Graduate Courses.
Students whose family income is less than Rs.2.00 lakhs per annum from all sources are eligible. Total income from all sources of the employed candidates or his/her parents/guardians, shall not exceed Rs.2.00 lakhs per annum. (Two hundred thousand rupees per annum)
Countries Eligible for Foreign Studies under this scheme
USA, UK, Australia, Canada, and Singapore.
What is the major difference between the real estate business in general and a real estate brokerage?
Answer:
Please see the answer below
Explanation:
The real estate business consists of production, marketing, and financing of real property; A real estate business is a business entity that deals with the buying, selling, management or investment of real estate properties.
While
A real state brokerage is directed primarily toward the sale, exchange, lease, rental, and financing for compensation. A broker may work for a commercial or residential seller and/or buyer. The duties vary, depending on the type of broker you are. Most brokers are both sellers’ and buyers’ agents. When another agent or broker sells a property from a different broker or agent, the two agencies split the commission.
Some brokers may be agents. They represent both the buyer and seller, although in some states, dual agency is not legal.
The major difference between the real estate business in general and a real estate brokerage is that the real estate business refers to the entire industry of buying, selling, and managing properties, while a real estate brokerage is a specific type of business within the real estate industry.
Explanation:The major difference between the real estate business in general and a real estate brokerage is that the real estate business refers to the entire industry of buying, selling, and managing properties, while a real estate brokerage is a specific type of business within the real estate industry.
A real estate brokerage is a company or an agency that employs licensed real estate agents who help clients buy, sell, or rent properties. They act as intermediaries between buyers and sellers, providing assistance with various aspects of the real estate transaction process.
On the other hand, the real estate business as a whole encompasses not just real estate brokerages, but also other types of businesses and professionals involved in property development, property management, real estate investment, and real estate law.
Xanat is grief-stricken after the death of her mother. Consequently, her productivity at work is suffering. Humberto, her supervisor, calls her for a meeting to discuss her deteriorating performance. Xanat tells him that she is finding it difficult to concentrate at work after her mother's death. Humberto recommends that Xanat should seek help from the company's Employee Assistance Program. This scenario illustrates the concept of _____.
A) closure
B) counseling
C) coaching
D) attribution
Answer: B) counseling
Explanation:
Counseling is the process of rendering professional advice and guidance to individuals through personal interviews, testing interests and aptitudes by utilizing psychological methods. In the case above the supervisor is trying to counsel Xanat due to her deteriorating performance, by assessing her and suggesting possible solutions to her condition.
Tawney Company is considering investing in a new piece of equipment that costs $700,000 and has a $200,000 residual value. The new equipment should provide a cost savings of $60,000 per year over its five-year life. In calculating ARR, what is the average amount invested in the asset (denominator)?
Answer:
average amount invested in the asset = $450,000
Explanation:
given data
equipment costs = $700,000
residual value = $200,000
cost savings = $60,000
to find out
average amount invested in the asset
solution
we get here Average amount invested that is express as
average amount invested in the asset = ( Amount invested + Residual value) ÷ 2 ........................1
put here value we get
average amount invested in the asset = [tex]\frac{$700000+$200000}{2}[/tex]
average amount invested in the asset = $450,000
Final answer:
The average amount invested in the asset for the ARR calculation is the sum of the initial cost and the residual value divided by two which is $ 450,000.
Explanation:
To calculate the average amount invested in an asset when determining the Accounting Rate of Return (ARR), one would typically average the initial cost of the asset with its residual or salvage value at the end of its useful life. In the scenario provided, Tawney Company is considering investing in equipment costing $700,000 with a residual value of $200,000 over a five-year life. We calculate the average investment by taking the sum of the initial cost and the residual value, and then dividing by two. Therefore, the average amount invested is
($700,000 + $200,000) / 2
= 900,000 /2
= $ 450,000.
A firm has the following order history over the last 6 months. January 120 February 95 March 100 April 75 May 100 June 50 What would be a 3-month weighted moving average forecast for July, using weights of 40% for the most recent month, 30% for the month preceding the most recent month, and 30% for the month preceding that one?
a. 50
b. 90
c. 72.5
d. 75
Answer:
(C) 72.5
Explanation:
3-month weighted moving average forecast for July is computed as the weighted average of the last 3 months - June, May and April.
July Forecast = [tex]Weight_{June} *Order_{June} +Weight_{May} *Order_{May}+Weight_{April} *Order_{April}[/tex]
July Forecast = (40%*50)+(30%*100)+(30%*75)
July Forecast = 72.5
under the securties act of 1933, which statements are true regarding a regulation D private placement exemption? adveristing permitted
Answer:
advertising is not permitted
Commissions can be received in connection with the offering.
Explanation:
Under the securities act of 1993, a regulation D private placements have some rules which included: advertising was not permitted and Commissions can be received in connection with the offering. These were only a few rules as Regulation D allows a "private placement" exemption if an issue is sold to a maximum of 35 "non-accredited" investors.
A buyer defaulted some time ago on a written contract to purchase a seller's real estate. Can the seller sue for damages?
Answer:
Yes, if statute of limitation allows.
Explanation:
A seller can sue the buyer because the buyer defaulted some time ago on a written context as long as the statute of limitation allows. Statute of limitation is a law which is normally passed by the legislation which limits a person to sue a client. So, yes a seller can sue the buyer if the seller is not prohibited according to the statute of limitation.
Rosemarie and Dominique, owners of Sugarplum Coffee and Pastry Shop, are concerned because Panera Bread is opening a new store just one mile from their shop. Rosemarie and Dominique know that Panera will be offering similar products; therefore, Panera Bread will be a(n) ________ of Rosemarie and Dominique.
Answer: Competitor
Explanation: Rosemarie and Dominique believes that Panera bread would be an active Competitor to their business because of the closeness of Panera bread store to theirs and also the fact that they sell similar products.
A competitor in marketing is a business that struggles for the same customers with another business due to sales of similar products.
Panera Bread will be a competitor to Rosemarie and Dominique's shop in a monopolistically competitive market, prompting the need for innovation and improved offerings.
In the situation provided, Panera Bread will be a competitor to Rosemarie and Dominique's Sugarplum Coffee and Pastry Shop. When a company like Panera, which offers similar products, enters the market close to an existing business, this can be challenging for the incumbent firm.
This scenario is a common occurrence in industries with monopolistic competition, where many firms sell products that are similar but not identical. Each business in a monopolistically competitive market has some market power and can behave like a monopoly to a certain degree, due to product differentiation.
This competitive market dynamic encourages businesses to innovate and constantly improve their offerings to maintain customer loyalty. The entrance of a new competitor often leads to businesses enhancing their products, services or customer experience.
For instance, a gas station may add services such as a coffee shop or car wash to differentiate itself, while a restaurant could develop unique recipes to attract customers. This competition is essential for market health, driving businesses to focus on quality, innovation, and customer satisfaction.
Kate wants to analyze the target audience for her company’s product. She wants to understand their needs so she can relate to them. Her company’s product is luxury homes. The buyers get to have a good location to live in and are able to interact with quality neighbors. Katie wants to use Maslow’s hierarchy of needs to understand the buyer’s needs. Which needs would the company’s product fulfill for the buyers? The company’s products would fulfill the ______ A.latent B.Psychological C.Self-esteem and ______ A.Safety B.Self-actualization C.social needs of the buyers.
Answer:
psychological and social
Luxury homes fulfill the safety and self-esteem needs, according to Maslow's hierarchy of needs. They contribute to safety by providing shelter and stability, while their status symbol supports the buyers' self-esteem. Their location and the quality of neighbors may also meet buyers' social needs of belonging and community.
Explanation:Based on Maslow's hierarchy of needs, Kate's company's product, luxury homes, would primarily fulfill the Self-esteem and Safety needs of potential buyers. According to Maslow's theory, safety needs include things like shelter and stability, which would be significantly addressed by the purchase of a luxury home. The need for self-esteem could be fulfilled by the status symbol provided by these luxury homes. Furthermore, the element of well-located homes with quality neighbors may also fulfill the Social needs if the buyers value community and belonging.
However, it's important to remember that needs can be unique from person to person. Some buyers may view the purchase of a luxury home as a path to self-actualization, i.e., realizing their full potential and achieving a level of success and comfort in their lives that they aspire to.
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Over the past 5 years, 50 new restaurants have opened and 30 have closed in the city of Zuni. Currently there are 110 restaurants operating in the city. Which of the following best represents the market structure, barriers to entry, and economic profits in the long run?
a. Market Structure = Perfectly Competitive ; Barriers to Entry = Low ; Long Run Economic Profit = Negative
b. Market Structure = Perfectly Competitive ; Barriers to Entry = High ;Long Run Economic Profit = Positive
c. Market Structure = Monopolistic Competition ; Barriers to Entry = Low ;Long Run Economic Profit = Zero
d. Market Structure = Monopolistic Competition ; Barriers to Entry = High ; Long Run Economic Profit = Positive
e. Market Structure = Monopolistic Competition ; Barriers to Entry = High ; Long Run Economic Profit = Zero
Answer:
c. Market Structure = Monopolistic Competition ; Barriers to Entry = Low ;Long Run Economic Profit = Zero
Explanation:
A monopolistic competition is when there are plenty firms operating in the industry. The firms sell differentiated products and they set their market price. There are low barriers to entry and exit of firms.
Because there are low barriers, if firms are making economic profits in the short run, firms enter into the industry in the long run and economic profit falls to zero. Therefore, in the long run, firms earn only accounting profit only.
A resturant is an example of a monopolistic competition.
A perfect competition is when there are plenty buyers and sellers of identical products. There are no barriers to entry and exit of firms. Therefore, in the long run, firms earn zero economic profit.
I hope my answer helps you
Julia is a U.S. citizen. She establishes a website that posts threatening messages about celebrities. Her website is.
Answer:
b. not protected by the First Amendment
Explanation:
Based on the information provided within the question it can be said that the Julia's website is not protected by the First Amendment. This is because the Supreme Court has never interpreted freedom of speech to allow the inclusion of obscenities. Which "threatening posts about celebrities" would fall under the category of obscenity and not be protected under the First Amendment.
Universe Co. issued 500,000 shares of common stock in the current year. Universe declared a 30% stock dividend. The market value was $50 per share, the par value was $10, and the average issue price was $30 per share. By what amount will Universe decrease shareholders’ equity for the dividend?
Answer:
The amount of $0 will decrease the shareholders equity for the dividend.
Explanation:
Stock Dividend is the kind of dividend in which the payment of dividend done in the form of additional or extra shares instead of a cash payout.
So, when the stock dividend is declared, then the portion of the retained earnings is re- classified as the contributed capital.
Therefore, the net effect on the aggregate equity will be $0.
Mortagae brokers are the ones who bring the home buyers and the lenders together.
True / False.
Answer:
True
Explanation:
A mortgage broker helps a borrower connect with lenders who represent the best fit in terms of the borrower's financial situation and interest-rate needs. A mortgage broker, a mortgage broker determines a loan-to-value ratio, and gathers all the required information regarding borrowers ideal loan type and forward them to the ideal lenders. The loan-to-value ratio is defined as a lending risk assessment ratio that financial institutions and other lenders examine before approving a mortgage. They also track down the unnecessary fees tacked onto closing costs by lenders when issuing a mortgage, this is called garbage fees. There are also a type of loan called the liar loan, these involve the category of mortgages that refers to low-documentation or no-documentation mortgages, this can be acronym to "no job, no income and no assets" type of borrowers.
Many firms use ______, who may specialize by product area in large companies, to help cut costs and coordinate relationships with suppliers.
Answer:
Purchasing managers.
Explanation:
A purchasing manager is responsible for establishing the best conditions for purchasing goods and services necessary to perform organizational activities.
Has more authority than a purchasing agent or buyer, although the exercise activities are similar, the purchasing manager has a greater responsibility for overseeing the procurement process and the activities of a purchasing agent or buyer.
The responsibilities of a purchasing manager are:
purchase of higher quality and lower priced goods and services. seek the most reliable suppliers for the organization. price negotiation and purchase contracts. forecast of future demand. (...)In a _____________ organization, specialists from different parts of the organization are brought together on a temporary basis to work on specific projects.
A. matrix
B. line
C. line-and-staff
D. centralized
Answer: Matrix Organization
Explanation:
Completing question with right answer:
In a matrix organization, specialists in different parts of an organization come together on temporary basis to perform a project.
For example in a matrix organization, engineering specialists and marketing specialists can team up to achieve higher sales for the organization, for which they would report to a common project leader.
Matrix organizations encourages employees to be able to diversify in their duties.
In a bid to attract more customers in a market that has several competitors, Barrymore's Bakery slashed the prices of all its products by 50 percent. Managers at the firm reasoned that lower prices would draw in even more customers, making up for the reduction in price several times over. Which of the following pricing strategies are they using?
a. Market-skimming pricing
b. Market-penetration pricing
c. Captive-product pricing
d. Cash discount pricing
e. By-product pricing
Answer: Market-penetration pricing
Explanation:
Market-penetration pricing is a type of price setting method where a sales company reduces the prices of it's products to attract customers to it's products.
Barrymore's Bakery is applying penetration pricing method by introducing a 50% discount on all of it's products to draw customers to its products in a market filled with so many competitors.
Lyon co. collected $1,200 in sales tax from customers during the month of march. in
Answer:
sales tax payable 1,200 debit
cash 1,200 credit
Explanation:
To record this entry we need to understand the sales tax is not an expense for the company as is charged into the invoice and paid by the customers.
The company is an intermediate agent between the customer and the government. The company's role is to collects the tax and pay to the government. We need to record the payment of 1,200 to the government thus, we write-off the sales tax payable and credit the cash give away to the IRS
The pharmaceutical industry is extremely dynamic. A company that releases a product to the general public with the intention of keeping prices high may see quick competition arising from other products made from different compounds that perform the same functions as the company's product. According to the five forces model, this type of threat is called _____.A. the level of rivalry among organizations in an industryB. the potential for entry into an industryC. the power of large suppliersD. the power of large customersE. the threat of substitute products
Answer:
E. the threat of substitute products
Explanation:
A common reason for facing competition is when a company's product has a close substitute.
Substitute products in this case refers to products that can be used in place for another. A popular example is Coca-cola and Pepsi, Tea and coffee. Both of these products could can satisfy the same need. For instance an individual can choose to have Pepsi over Coca-Cola.
This type of threat may affect the company because of compounds that perform the same functions as the company's product.