Chapter 23 Performance Measurement,
Compensation, and Multinational
Considerations questions with answers.
Balanced Scorecard ANS -1. Financial perspective
2. customer perspective
3. internal business process perspective
4. learning and growth perspective
Designing accounting-based performance measures: ANS -1. choose performance measures that align
with the firm's financial goals
2. choose the details of each performance measure in step 1
3. choose a target level of performance and feedback mechanism for each performance measure in step
1
Investment ANS -resources or assets used to generate income
Weakness of comparing OI alone ANS -it ignores the differences in the size of the investment
Return on Investment (ROI) ANS -accounting measure of income divided by an accounting measure of
investment
ROI = Income / Investment
indicates which investment yields the highest return
ROI is popular because ANS -"accounting rate of return"
"accrual accounting rate of return"
(1) it blends all the ingredients of profitability into single percentage
, (2) it can be compared with the rate of return on opportunities elsewhere
DuPont Method of Profitability Analysis ANS -Income / Investment
=
Income / Revenues
X
Revenues / Investment
ROI = Return on sales X investment turnover
DuPont method recognizes ANS --increasing the income per dollar of revenues
-using assets to generate more revenues
Reducing investment base involves ANS --decreasing idle cash
-managing credit judiciously
-determining proper inventory levels
-spending carefully on long-term assets
Residual Income (RI) ANS -accounting measure of income minus a dollar amount for required return on
an accounting measure of investment
RI = Income - (required rate of return x investment)
overcomes goal congruence of ROI
Imputed Cost ANS -costs recognized in particular situations but not incorporated in financial accounting
records because it is an opportunity cost
Imputed cost of the investment = ANS -required rate of return
Compensation, and Multinational
Considerations questions with answers.
Balanced Scorecard ANS -1. Financial perspective
2. customer perspective
3. internal business process perspective
4. learning and growth perspective
Designing accounting-based performance measures: ANS -1. choose performance measures that align
with the firm's financial goals
2. choose the details of each performance measure in step 1
3. choose a target level of performance and feedback mechanism for each performance measure in step
1
Investment ANS -resources or assets used to generate income
Weakness of comparing OI alone ANS -it ignores the differences in the size of the investment
Return on Investment (ROI) ANS -accounting measure of income divided by an accounting measure of
investment
ROI = Income / Investment
indicates which investment yields the highest return
ROI is popular because ANS -"accounting rate of return"
"accrual accounting rate of return"
(1) it blends all the ingredients of profitability into single percentage
, (2) it can be compared with the rate of return on opportunities elsewhere
DuPont Method of Profitability Analysis ANS -Income / Investment
=
Income / Revenues
X
Revenues / Investment
ROI = Return on sales X investment turnover
DuPont method recognizes ANS --increasing the income per dollar of revenues
-using assets to generate more revenues
Reducing investment base involves ANS --decreasing idle cash
-managing credit judiciously
-determining proper inventory levels
-spending carefully on long-term assets
Residual Income (RI) ANS -accounting measure of income minus a dollar amount for required return on
an accounting measure of investment
RI = Income - (required rate of return x investment)
overcomes goal congruence of ROI
Imputed Cost ANS -costs recognized in particular situations but not incorporated in financial accounting
records because it is an opportunity cost
Imputed cost of the investment = ANS -required rate of return
