ACC 516 Chapter 23 Performance
Measurement, Compensation, and
Multinational Consideration questions
with answers.
What is internal financial information based on? ANS -Accounting numbers that are routinely reported
How does benchmarking factor into this chapter? ANS -Internal financial measures are often
benchmarked against external financial information as well as both internal and external non-financial
information
Examples of external financial information (1) ANS -- Stock prices
Examples of external non-financial information (2) ANS -- Customer satisfaction ratings
- Market share
Examples of internal non-financial information (4) ANS -- Rates
- Manufacturing lead time
- Productivity
- Number of new patents
What does the balanced scorecard do? ANS -Uses a single report for financial and non-financial
performance measures
What is an investment? ANS -Resources or assets used to generate income
, What is return on investment (ROI)? ANS -An accounting measure of income divided by an accounting
measure of investment
How to calculate ROI ANS -Income / Investment
What is the most popular approach to measuring management performance? ANS -Return on
investment (ROI)
What is the DuPont method of profitability analysis (for ROI) ANS -Income/Investment (ROI) =
Revenues/Investment (Investment Turnover) x Income/Revenues (Return on Sales)
What is residual income? ANS -An accounting measure of income minus a dollar amount for required
return on an accounting measure of investment
How to increase ROI (3) ANS -- Increasing revenues using assets to generate additional amount
- Decreasing costs (increase income per dollar of revenue)
- Decreasing investment (decreasing idle cash, managing credit judiciously, determining proper
inventory levels, and spending carefully on fixed assets)
How to calculate residual income ANS -Income - (Required rate of return x Investment)
What is the imputed cost of the investment? ANS -With regard to residual income, Required Rate of
Return x Investment
Recognized in particular situations that are not usually recognized by accrual accounting procedures
What is the imputed cost of equity? ANS -Return forgone by not investing in other equity securities of
similar risk
Measurement, Compensation, and
Multinational Consideration questions
with answers.
What is internal financial information based on? ANS -Accounting numbers that are routinely reported
How does benchmarking factor into this chapter? ANS -Internal financial measures are often
benchmarked against external financial information as well as both internal and external non-financial
information
Examples of external financial information (1) ANS -- Stock prices
Examples of external non-financial information (2) ANS -- Customer satisfaction ratings
- Market share
Examples of internal non-financial information (4) ANS -- Rates
- Manufacturing lead time
- Productivity
- Number of new patents
What does the balanced scorecard do? ANS -Uses a single report for financial and non-financial
performance measures
What is an investment? ANS -Resources or assets used to generate income
, What is return on investment (ROI)? ANS -An accounting measure of income divided by an accounting
measure of investment
How to calculate ROI ANS -Income / Investment
What is the most popular approach to measuring management performance? ANS -Return on
investment (ROI)
What is the DuPont method of profitability analysis (for ROI) ANS -Income/Investment (ROI) =
Revenues/Investment (Investment Turnover) x Income/Revenues (Return on Sales)
What is residual income? ANS -An accounting measure of income minus a dollar amount for required
return on an accounting measure of investment
How to increase ROI (3) ANS -- Increasing revenues using assets to generate additional amount
- Decreasing costs (increase income per dollar of revenue)
- Decreasing investment (decreasing idle cash, managing credit judiciously, determining proper
inventory levels, and spending carefully on fixed assets)
How to calculate residual income ANS -Income - (Required rate of return x Investment)
What is the imputed cost of the investment? ANS -With regard to residual income, Required Rate of
Return x Investment
Recognized in particular situations that are not usually recognized by accrual accounting procedures
What is the imputed cost of equity? ANS -Return forgone by not investing in other equity securities of
similar risk
