Where management's bonuses are tied to profit-based performance measures management may have an incentive not to revalue assets because:
A) When revaluing assets, the value of the asset base increases, consequently the return on assets will fall.
B) A revaluation may result in a decrease in the value of the asset base.
C) A revaluation that increases the value of the asset base will increase profit measures.
D) When revaluing assets, the value of the asset base increases, consequently the debt to equity ratio will fall.
E) None of the given answers.

Question

Quizplus · Accepted Answer

Revaluing assets increases the asset base, which can lower the return on assets, a key profit-based performance measure.

Where Management's Bonuses Are Tied to Profit-Based Performance Measures Management