CFA Level I · CFA Level I Exam · Business Models
Which of the following is the most appropriate description of a firm's value proposition within its business model?
A value proposition is the benefit a firm promises customers that gives them a reason to choose its offering over alternatives, such as lower price, convenience or quality. It is not a valuation multiple or a cost schedule.
- AThe benefit the firm promises customers that leads them to choose its offering over alternativesCorrect
- BThe total market value of the firm's equity divided by its book value
- CThe schedule of fixed costs incurred in operating production facilities
Explanation
A value proposition states the benefits customers receive, such as lower price, convenience, quality or customization, giving them a reason to select the firm. The other options describe a valuation ratio and a cost schedule.
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