Question 1

Return on investment can be increased by:
A)decreasing operating assets.
B)increasing operating assets.
C)decreasing revenues.
D)Both B and C are correct.

Accepted Answer

ROI is calculated by dividing net income by total assets. Therefore, decreasing operating assets while maintaining the same level of net income will result in a higher ROI. Increasing operating assets will increase the denominator in the ROI formula, which will decrease the ratio and lower the ROI. Decreasing revenues will also result in a lower net income and decrease the ROI.

Question 2

During the past 12 months,the Wombat Corporation had a net profit of $39 200.What is the return on investment if the amount of the investment is $280 000?
A)10%
B)12%
C)14%
D)16%

Accepted Answer

The return on investment (ROI) is calculated by dividing the net profit by the amount of the investment and then multiplying by 100 to get a percentage. So, ROI = ($39,200 / $280,000) * 100 = 14%.

Question 3

Many common performance measures,such as customer satisfaction,rely on internal financial accounting information.

Accepted Answer

Customer satisfaction measures are typically based on external surveys and feedback from customers, rather than internal financial accounting information.

Question 4

Which statement about designing an accounting-based performance measure is FALSE?
A)The issues considered in each step are independent.
B)Management's beliefs are present during the analyses.
C)The steps need not be done sequentially.
D)Behavioural criteria are important when evaluating the steps.

Accepted Answer

The issues considered in each step are not independent and are interconnected. The results of one step may influence and impact the decisions made in subsequent steps. Therefore, it is essential to consider each step in relation to the others and not treat them as independent.

Question 5

The question 'Should assets be defined as total assets or net assets?' is considered to be part of which step in designing an accounting-based performance measure?
A)Choose performance measures that align with top management's financial goals.
B)Choose the time period of each performance measure.
C)Choose a definition for each performance measure.
D)Choose a measurement alternative for each performance measure.

Accepted Answer

This question deals with choosing a definition for the performance measure, which is a key step in designing an accounting-based performance measure. The other options listed involve choosing the time period and measurement alternative, or aligning goals with top management, but they do not directly relate to the specific issue of how to define assets for the performance measure.

Question 6

Companies are increasingly using non-financial measures to evaluate performance.Since these measures do not come from the company's financial records,why are they used?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The answer of Companies are increasingly using non-financial measures to...

Question 7

The first step in designing accounting based performance measures is to choose performance measures that align with top management's financial goals.

Accepted Answer

The first step in designing accounting-based performance measures is to select measures that are consistent with the financial objectives of top management, as strategic goals should be reflected in the performance measures used to gauge the organization's success.

Question 8

Designing an accounting based performance measure requires six steps.List each step.For three of the steps,describe a question that must be resolved as part of the implementation process.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The answer of Designing an accounting based performance measure requires...

Question 9

The return on investment is usually considered the most popular approach to incorporating the investment base into a performance measure because:
A)it blends all the ingredients of profitability into a single percentage.
B)it is similar to the company's price earnings ratio which is available daily in the financial press.
C)once determined,there is no need to use it with other measures of performance.
D)Both A and C are correct.

Accepted Answer

The return on investment (ROI) is a popular approach to incorporating the investment base into a performance measure because it blends all the ingredients of profitability into a single percentage. It takes into account both the net profit and the capital invested in the business. Option B is incorrect as the price-earnings ratio is a measure of valuation and is not directly related to the ROI. Option C is incorrect as the ROI provides only one aspect of the overall performance of a company, and it should be used in conjunction with other measures of performance such as the return on equity (ROE) or return on assets (ROA). Therefore, option D is also incorrect.

Question 10

Customer-satisfaction measures are an example of the:
A)financial report scorecard approach.
B)balanced scorecard approach.
C)goal-congruence approach.
D)investment success approach.

Accepted Answer

Customer satisfaction measures are a key part of the balanced scorecard approach, as they help to ensure that the organization is meeting the needs of its customers and stakeholders. The balanced scorecard approach focuses on multiple dimensions of performance, including financial, customer, internal processes, and learning and growth, to provide a more comprehensive view of organizational performance. This approach aligns strategic objectives across these dimensions to promote goal-congruence and overall investment success.

Question 11

An example of a performance measure with a long-run time horizon is:
A)direct materials efficiency variances.
B)number of new patents developed.
C)return on investment.
D)All of these answers are correct.

Accepted Answer

The number of new patents developed is a performance measure with a long-run time horizon as it takes time for research and development to lead to new patents. Direct materials efficiency variances and return on investment are measures that are typically evaluated on a shorter time horizon.

Question 12

Managers usually use the term 'return on investment' to evaluate:
A)the performance of a subunit.
B)a potential project.
C)the performance of a subdivision.
D)Both A and C are correct.

Accepted Answer

The term 'return on investment' (ROI) is commonly used by managers to evaluate the performance of a subunit or a subdivision within an organization, as it helps in assessing the efficiency and profitability of different segments.

Question 13

Some companies present financial and non-financial performance measures for their subunits in a single report called the 'balanced scorecard'.

Accepted Answer

The balanced scorecard is a management tool that presents financial and non-financial performance measures together in a single report. These measures are organized into four perspectives: financial, customer, internal business processes, and learning and growth.

Question 14

The ________ method of profitability analysis recognises the two basic ingredients in profit-making: increasing profit per dollar of revenues and using assets to generate more revenues.
A)balanced scorecard
B)DuPont
C)residual-income
D)economic value added

Accepted Answer

The DuPont method of profitability analysis breaks down return on equity (ROE) into three components: net profit margin, asset turnover, and financial leverage. This method recognizes that profitability is dependent on both increasing profit margins (i.e., increasing profit per dollar of revenues) and efficiently using assets to generate more revenues. The other options (A, C, and D) are also methods of profitability analysis, but they do not specifically recognize these two key ingredients in profit-making.

Question 15

The CEO of Geelong Pen Company wants to establish an accounting-based performance measurement system for the company's new plant.The company has an accounting information system sufficient to support a fairly sophisticated performance measurement system.The new plant is going to be considered an investment centre since its products will be markedly different from others the company currently sells.The new plant will have no internal dealings with other plants within the company.
Required:
What are some of the key steps that should be undertaken in the establishment of an accounting-based performance measurement system?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The answer of The CEO of Geelong Pen Company wants...

Question 16

The question 'Does operating profit best measure a subunit's financial performance?' is considered to be part of which step in designing an accounting-based performance measure?
A)Choose performance measures that align with top management's financial goals.
B)Choose the time horizon of each performance measure.
C)Choose a definition for each performance measure.
D)Choose a measurement alternative for each performance measure.

Accepted Answer

The answer of The question 'Does operating profit best measure...

Question 17

The question 'Should assets be measured at historical cost or current cost?' is considered to be part of which step in designing an accounting-based performance measure?
A)Choose performance measures that align with top management's financial goals.
B)Choose the time period of each performance measure.
C)Choose a definition for each performance measure.
D)Choose a measurement alternative for each performance measure.

Accepted Answer

The question about whether to measure assets at historical cost or current cost is related to choosing a measurement alternative for each performance measure. The other choices listed do not address this specific question.

Question 18

A report that measures financial and non-financial performance measures for various organisation units in a single report is called a(n):
A)unbalanced scorecard.
B)imbalanced scorecard.
C)balanced scorecard.
D)financial report scorecard.

Accepted Answer

A balanced scorecard is a report that measures financial and non-financial performance measures for various organization units in a single report. This helps organizations to have a more comprehensive view of their overall performance, rather than focusing solely on financial measures. An unbalanced scorecard refers to a scorecard that is heavily weighted towards either financial or non-financial measures, while an imbalanced scorecard refers to a scorecard that is not aligned with the organization's strategy. A financial report scorecard would only measure financial performance measures, and not non-financial measures.

Question 19

During the past 12 months,the Platypus Corporation had a net profit of $50 000.What is the amount of the investment if the return on investment is 20%?
A)$100 000
B)$200 000
C)$250 000
D)$500 000

Accepted Answer

The formula for calculating return on investment is ROI = (Net Profit / Investment) x 100.

Substituting the given values, 
20 = (50 000 / Investment) x 100

Solving for Investment, 
Investment = (50 000 / 20) x 100

Investment = $250 000

Therefore, the answer is C - $250 000.

Question 20

The 'balanced scorecard' in most organisations is broken down into the following categories: financial perspective,customer perspective,internal business-process perspective,and productivity perspective.

Accepted Answer

The 'balanced scorecard' typically includes financial perspective, customer perspective, internal business-process perspective, and learning and growth perspective, not productivity perspective.

Quiz 20: Performance Measurement, Compensation and Multinational Considerations

Return on investment can be increased by:

During the past 12 months,the Wombat Corporation had a net profit of $39 200.What is the return on investment if the amount of the investment is $280 000?

Many common performance measures,such as customer satisfaction,rely on internal financial accounting information.

Which statement about designing an accounting-based performance measure is FALSE?

The question 'Should assets be defined as total assets or net assets?' is considered to be part of which step in designing an accounting-based performance measure?

Companies are increasingly using non-financial measures to evaluate performance.Since these measures do not come from the company's financial records,why are they used? _ _

The first step in designing accounting based performance measures is to choose performance measures that align with top management's financial goals.

Designing an accounting based performance measure requires six steps.List each step.For three of the steps,describe a question that must be resolved as part of the implementation process. _ _

The return on investment is usually considered the most popular approach to incorporating the investment base into a performance measure because:

Customer-satisfaction measures are an example of the:

An example of a performance measure with a long-run time horizon is:

Managers usually use the term 'return on investment' to evaluate:

Some companies present financial and non-financial performance measures for their subunits in a single report called the 'balanced scorecard'.

The ________ method of profitability analysis recognises the two basic ingredients in profit-making: increasing profit per dollar of revenues and using assets to generate more revenues.

The question 'Does operating profit best measure a subunit's financial performance?' is considered to be part of which step in designing an accounting-based performance measure?

The question 'Should assets be measured at historical cost or current cost?' is considered to be part of which step in designing an accounting-based performance measure?

A report that measures financial and non-financial performance measures for various organisation units in a single report is called a(n) :

During the past 12 months,the Platypus Corporation had a net profit of $50 000.What is the amount of the investment if the return on investment is 20%?

The 'balanced scorecard' in most organisations is broken down into the following categories: financial perspective,customer perspective,internal business-process perspective,and productivity perspective.