Chapter4

Which of the following statements are correct?

a. Summary financial measures reflect the aggregate or bottom-line impacts of multiple performance areas

b. Disaggregated financial measures are for example revenues or expenses

c. Combinations of financial measures can involve the use of several summary financial measures and/or several disaggregates financial measures

d. Combinations of financial measures cannot include nonfinancial measures

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and d) are correct

h. Statements a), b) and c) are correct

Which of the following statements are correct?

a. An extensive use of accounting measures typically causes a tendency to make managers excessively short-term oriented, or myopic

b. An extensive use of accounting measures typically causes a tendency to make managers excessively long-term oriented, or myopic

c. The primary objective of for-profit organizations is to maximize the value of the firm

d. The primary objective of non-profit organizations is to maximize the value of the firm

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and c) are correct

h. Statements b) and c) are correct

Which of the following statements are correct?

a. The value of any economic asset can be calculated at any specific time by discounting the future cash flows that the company is expected to generate for the time value of money and for risk

b. Value of the company can be increased by increasing the size of future cash flows of the company

c. Value of the company can be increased by accelerating the timing of future cash flows

d. Value of the company can be increased by making the future cash flows more certain/less risky

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and b) are correct

h. Statements b), c) and d) are correct

Which of the following statements are correct?

a. Accounting-based measures are not transactions-oriented

b. In some types of firms accounting profit measures are essentially meaningless

c. Accounting-based measures are congruent with the organizational goal of profit maximization d. Accounting-based measures are inexpensive

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a), b) and c) are correct

h. Statements b), c) and d) are correct

Which of the following statements are correct?

a. Accounting measures are far from perfect indicator of firm value and value changes

b. One of the major disadvantages of accounting measures is that many things affect accounting profits but not economic income, and vice versa

c. Accounting profit ignores risk

d. Profit figures focus on the past, while the economic value is derived from future cash flows

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and b) are correct

h. Statements c) and d) are correct

Which of the following measures of performance are the financial performance measures?

a. Market measures of performance.

b. Accounting measures of performance.

c. Return on investment measures of performance.

d. Residual income measures of performance.

e. All of the above-named measures of performance.

f. None of the above-named measures of performance.

g. Measures a), c) and d).

h. Measures a) and d).

Which of the following statements referring to ROI are correct?

a. ROI is a ration of the accounting profit earned by the division divided by the investment tied up in the division

b. Among the most common ROI-type ratios are return on investment/assets/capital (ROI/ROA/ROC), return on equity (ROE), return on capital employed (ROCE), and return on net assets (RONA)

c. ROI-type measures provide single, comprehensive measure, common denominators and they are comparable to other financial returns

d. ROI measures have been in use for so long in so many places, virtually all managers understand both what the measures reflect and how they can be influenced

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and b) are correct

h. Statements a), c) and d) are correct

Which of the following statements are correct?

a. ROI is a ration of the accounting profit earned by the division divided by the investment tied up in the division

b. The asset values reflected on the balance sheet do not always represent the real value of the assets

c. When net book value (NBV) is used, return on investment (ROI) is usually overstated

d. Return on investment (ROI) calculated using net book value (NBV) automatically increases over time if no further investments are made

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a), b) and c) are correct

h. Statements a) and b) are correct

Which of the following statements are correct?

a. Residual income is a ratio of the accounting profit earned by the division divided by the investment tied up in the division

b. Residual income is calculated by subtracting from profit a capital charge for the net assets tied up in the investment center

c. Economics Value Added (EVA) = Modified net operating profit after tax – (modified total capital * weighted average cost of capital)

d. Economics Value Added (EVA) = Modified net operating profit after tax + (modified total capital * weighted average cost of capital)

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and d) are correct

h. Statements b) and c) are correct

Which of the following statements referring to residual income are correct?

a. Residual income is calculated by subtracting from profit a capital charge for the net assets tied up in the investment center

b. Residual income is calculated by adding capital charge for the net assets tied up in the investment center to the profit

c. Residual income addresses the distortions often caused when managers make new investments in fixed assets

d. Residual income does not address the financial-type suboptimization problem.

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a), c) and d) are correct

h. Statements b), c) and d) are correct

Which of the following statements are correct?

a. The use of financial results controls that emphasize current-period accounting profits can cause managers to become excessively short-term oriented, or myopic

b. One of the possible solutions of myopia problem is reducing the pressure for short-term profit

c. Reducing the pressure for short-term profit can be achieved by reducing the weighting placed on the annual profit targets

d. Reducing the pressure for short-term profit can be achieved by making short-term profit targets easier to achieve

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and d) are correct

h. Statements a), b) and c) are correct

Which of the following statements are correct?

a. Control investments with Preaction Reviews can be used to alleviate the myopia problem

b. Extending the Measurement Horizon to at least 5 to 7-year period (using Long-Term Incentives) can be used to alleviate the myopia problem

c. Extending the Measurement Horizon to at least 3 to 5-year period (using Long-Term Incentives) can be used to alleviate the myopia problem

d. Measuring Changes in Value directly can be used to alleviate the myopia problem

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a), b) and d) are correct

h. Statements a), c) and d) are correct

Which of the following statements are correct?

a. Myopia is a dysfunctional side-effect of financial results control systems

b. Operating expenses are necessary to produce current-period revenues, while developmental expenses are incurred in order to generate revenues in future periods

c. The longer the period of measurement, the more incongruent the accounting measures of performance are likely to be with economic income

d. When extending the measurement horizon (long-term incentives) the measurement period should last at least a 3 to 5-year period

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a), b) and d) are correct

h. Statements a) and d) are correct

Which of the following measures can be used to alleviate the myopia problem?

a. Reducing pressures for short-term profits

b. Extending the measurement horizon (using long-term incentives)

c. Adjusting and/or improving the accounting measures

d. Control investments with preaction reviews (action controls)

e. All of the above-named measures

f. None of the above-named measures

g. Measures a), c) and d)

h. Measures b), c) and d)

Which of the following statements are correct?

a. One way of alleviating the myopia problem is measuring a set of value drivers

b. Balanced Scorecards proposes a combination of short-term measures and leading indicators framed into the following four perspectives financial, customer, internal and innovation and learning perspective

c. One of the advantages of combination-of-measurement-systems is that the performance factors do not interact

d. One of the advantages of combination-of-measurement-systems is that they do not cost much

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and b) are correct

h. Statements a), c) and d) are correct

Which of the following statements are correct?

a. Measuring a set of value drivers can be used to alleviate the myopia problem

b. Balanced Scorecard is an example of using measurement combinations in the form of sets of value drivers

c. Four perspectives of a Balanced Scorecard are: financial, customer, internal and external perspective

d. Four perspectives of a Balanced Scorecard are: financial, customer, internal and innovation and learning perspective

e. All of the above-named statements are correct

f. None of the above Statement is correct

g. Statements a), b) and d) are correct

h. Statements a), b) and c) are correct

Which of the following statements referring to combination-of-measurements-systems are correct?

a. One advantage of the combination-of measurements-systems is that they have forward- looking feature

b. Combination-of measurements-systems are not costly

c. Another advantage of the combination-of-measurements-systems is that the payoff relationships are linear

d. The performance factors related to the combination-of-measurements-systems do not interact

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and c) are correct

h. Statements b) and d) are correct

Which of the following statements referring to combination-of-measurement systems are correct?

a. The performance factors do not interact

b. Many of the payoff relationships are linear

c. Combination-of-measurement systems are more flexible

d. One of the disadvantages of the combination-of-measurement systems is the lacking of the forward-looking features

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and c) are correct

h. Statements b) and d) are correct

Which of the following statements are correct?

a. One of the advantages of combination-of-measurement-systems is that the performance factors do not interact

b. One of the advantages of combination-of-measurement-systems is that they do not cost much

c. One of the advantages of combination-of-measurement-systems is that many of the payoff relationships are linear

d. One of the disadvantages of combination-of-measurement-systems is that they are not flexible

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and b) are correct

h. Statements c) and d) are correct

Which of the following statements are correct?

a. One of the advantages of combination-of-measurement-systems is that the performance factors do not interact

b. One of the advantages of combination-of-measurement-systems is that they do not cost much

c. One of the advantages of combination-of-measurement-systems is that many of the payoff relationships are linear

d. One of the advantages of combination-of-measurement-systems is that they are flexible

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and b) are correct

h. Statements c) and d) are correct

Which of the following statements are correct?

a. Controllability principle implies that business risks should be left with the business owners

b. Controllability principle implies that employees should not be asked to bear uncontrollable business risks

c. Risk aversion is the basis for the primary argument supporting the controllability principle

d. Economic and Competitive Factors, Forces Majeures and Interdependencies are types of uncontrollable factors

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and b) are correct

h. Statements a), b) and c) are correct

Which of the following statements are correct?

a. Profit is affected by many factors that change: consumer demand, product/service prices, the costs of doing business (factor costs) and/or on-time delivery measures

b. Forces majeures includes indicate unpredictable and unreasonably severe events caused by natural or other forces over which employees have no control

c. Interdependence signifies that an entity is not completely self-contained, causing the measured results of the entity to be affected by other entities within the organization

d. Interdependencies can occur in forms of pooled, sequential and reciprocal interdependencies or stern from interventions from higher-level management

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and b) are correct

h. Statements c) and d) are correct

Which of the following statements are correct?

a. Interdependence signifies that an entity is not completely self-contained, causing the measured results of the entity to be affected by other entities within the organization

b. Interdependencies can occur in forms of pooled, sequential and reciprocal interdependencies or stern from interventions from higher-level management

c. Reciprocal interdependencies exist when the outputs of one entity are the inputs of another entity

d. Organizations that are high in sequential interdependence are horizontally integrated firms

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and b) are correct

h. Statements b), c) and d) are correct

Which of the following statements are correct?

a. Interdependence signifies that an entity is completely self-contained

b. Pooled interdependencies exist where a firm’s entities use common resources or resource pools

c. Sequential interdependencies are bi-directional sequential interpendencies

d. Reciprocal interdependencies exist when the outputs of one entity are the inputs of another entity

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements b), c) and d) are correct

h. Statements c) and d) are correct

Which of the following statements are correct?

a. Reciprocal interdependencies exist when the outputs of one entity are the inputs of another entity

b. Organizations that are high in sequential interdependence are horizontally integrated firms

c. Organizations that are high in reciprocal interdependence are vertically integrated firms

d. Sequential interdependencies involve organizational entities that both produce outputs used by other entities and use at the same time inputs from them

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements b) and c) are correct

h. Statements a), b) and c) are correct

Which of the following statements are correct?

a. Purchasing insurance is a method to control for uncontrollable after the measurement period b. Design or responsibility structures is a method to control for uncontrollable after the measurement period

c. Objectively using variance analysis, flexible performance standards or relative performance evaluations the uncontrollable can be controlled before the measurement period

d. Subjectively through exercising evaluator judgement the uncontrollable can be controlled before the measurement period

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and c) are correct

h. Statements b) and d) are correct

Which of the following statements are correct?

a. Two approaches to control for uncontrollable factors are controlling for Uncontrollable before and after the Measurement period begins.

b. Controlling for uncontrollable before the measurement period begins can be carried out objectively by using variance analysis, flexible performance standards or relative performance evaluations

c. Controlling for uncontrollable before measurement period begins can be carried out subjectively through exercising evaluator judgement

d. Controlling for uncontrollable before measurement period begins can be carried out by purchasing an insurance or designing responsibility structures

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and d) are correct

h. Statements a), b) and c) are correct

Which of the following statements are correct?

a. Controlling for uncontrollable after the measurement period begins can be done in two different ways: Objectively and subjectively

b. Variance analyses are used to explain why actual results are different from predetermined standards, budgets or expectations

c. Flexible budgets are flexible performance standards expressed in financial terms

d. Subjective performance evaluations are likely to be biased

e. All of the above-named statements are correct

f. None of the above-named statement is correct

g. Statements a) and c) are correct

h. Statements b) and d) are correct

Which of the following factors are types of uncontrollable factors?

a. Economic Factors

b. Competitive Factors

c. Forces Majeures

d. Interdependencies

e. All of the above-named factors

f. None of the above-named factors

g. Factors a), b) and d)

h. Factors b) and d)