ACNT 2402 Chapter 09 -- Performance Measurement in Decentralized Organizations – Study Guide
1. Land held for possible plant expansion would not be included as an operating asset when computing return on investment (ROI). TRUE 2. When used in return on investment (ROI) calculations, operating assets do not include investments in land held for future use and investments in other companies. TRUE 3. A disadvantage of using ROI to evaluate performance is that it encourages the manager to reduce the investment in operating assets as well as increase net operating income. FALSE 4. Operating assets include cash, accounts receivable, and inventory but not any depreciable fixed assets. FALSE 5. Return on investment (ROI) equals margin multiplied by turnover. TRUE 6. All other things being the same, a decrease in average operating assets will decrease return on investment (ROI). FALSE 7. M
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