Chap025 - Chapter 25 Rewarding Business Performance Chapter 25 Rewarding Business Performance True False Questions s 1 Return on investment(ROI tells us

Chap025 - Chapter 25 Rewarding Business Performance Chapter...

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Chapter 25 - Rewarding Business PerformanceChapter 25Rewarding Business PerformanceTrue / False Questions s1. Return on investment (ROI) tells us how much earnings can be expected for the average invested dollar. True False2. Capital turnover is equal to sales divided by total investment. 3. Return on investment indicates the profitability that can be expected from one dollar of sales. 4. To increase return on sales, a manager could decrease cost of goods sold while increasing revenues. 5. Capital turnover can be improved by reducing invested capital while keeping sales constant. True False6. The balanced scorecard approach attempts to measure whether an organization is meeting its strategic goals. 25-1
Chapter 25 - Rewarding Business Performance7. A stock option is a right to sell a certain number of shares at a specific price sometime in the future. 8. The value chain consists of only those activities that increase the selling price of a product as it is distributed to a customer. 9. The return on investment is calculated by multiplying the capital turnover by the return on sales. True False10. Capital turnover is calculated by dividing operating income by invested capital. 11. A common criticism of capital ROI as a performance measurement criterion is that it encourages a long-term orientation sometimes to the detriment of shorter-term planning. 12. Residual income is calculated by subtracting the minimum acceptable return on the average invested capital from the operating income. 13. Operating earnings rather than net income is used to compute return on sales. True False25-2
Chapter 25 - Rewarding Business Performance14. The main objective of the balanced scorecard system of performance measurement is achieving the organization's strategic goals. 15. The value chain starts with the supplier and ends with the consumer. 16. Stock based performance evaluation of managers is considered more risky than accounting based performance evaluation. 17. Most organizations try to achieve their goals by providing incentives to employees who use resources wisely. True False18. Accounting systems do not offer any benefit to management in generating and focusing employee motivation. 19. Using only ROI as a business performance measure often leads to the best decisions. 20. Residual income is the difference between net operating income at breakeven and actual net operating income. 21. EVA stands for "evaluating value added" performance. True False25-3
Chapter 25 - Rewarding Business Performance22. Bonuses may be used to reward employees who meet performance goals. Multiple Choice Questions

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