Which of the following may be the best measure of

27. Which of the following may be the best measure of company performance?
A. EVA
B. Net income
C. ROA
D. ROE
AACSB: Reflective Thinking Skills
Blooms: Understanding
Difficulty: 2 Medium
Learning Objective: 04-02 Calculate and interpret key measures of financial performance; including economic value added (EVA) and rates
of return on capital; assets; and equity.
Topic: Measuring Value
28. Which of the following is correct?
AACSB: Reflective Thinking Skills
Blooms: Understanding
Difficulty: 2 Medium
Learning Objective: 04-02 Calculate and interpret key measures of financial performance; including economic value added (EVA) and rates
of return on capital; assets; and equity.
Topic: Measuring Value
4-35

Chapter 04 - Measuring Corporate Performance
29. The board of directors is dissatisfied with last year's ROE of 15%. If the profit margin and
asset turnover ratio remain unchanged at 8% and 1.25, respectively, by how much must the
leverage ratio (i.e., assets/equity) increase to achieve 20% ROE?
AACSB: Reflective Thinking Skills
Blooms: Application
Difficulty: 3 Hard
Learning Objective: 04-02 Calculate and interpret key measures of financial performance; including economic value added (EVA) and rates
of return on capital; assets; and equity.
Topic: Understanding Financial Ratios
30. The use of debt in the firm's capital structure will increase ROE if the firm:
AACSB: Reflective Thinking Skills
Blooms: Understanding
Difficulty: 2 Medium
Learning Objective: 04-02 Calculate and interpret key measures of financial performance; including economic value added (EVA) and rates
of return on capital; assets; and equity.
Topic: Understanding Financial Ratios
4-36

Chapter 04 - Measuring Corporate Performance