Question : 21) Which of the following incorporates the amount of investment : 1186236

 

21) Which of the following incorporates the amount of investment into a performance measure?

A) dividend income

B) residual income

C) return on investment

D) both residual income and return on investment

E) both dividend income and residual

 

Use the information below to answer the following question(s).

 

Berger Publishing has two divisions which operate autonomously. Their results for the past year were as follows:

 

 

Toronto

Vancouver

Sales

$5,000,000

$6,000,000

Contribution margin

2,500,000

3,000,000

Operating income

2,000,000

3,500,000

Investment base (total assets)

6,500,000

7,500,000

 

The company’s desired rate of return is 15%.

 

22) What are the respective return-on-investment ratios for the Toronto and Vancouver divisions?

A) 0.04; 0.58

B) 0.31; 0.47

C) 0.38; 0.40

D) 0.77; 1.25

E) 0.38; 0.45

23) What are the respective residual incomes for the Toronto and Vancouver divisions?

A) $975,000; $1,125,000

B) $1,025,000; $1,125,000

C) $1,025,000; $2,375,000

D) $2,375,000; $1,025,000

E) $1,075,000; $1,125,000

 

24) Which of the following is true concerning the ROI performance measure?

A) ROI is based on cash flow.

B) Is also called the accounting rate of return.

C) Some companies use net assets (assets minus liabilities) as the numerator.

D) The usual formulation is [total assets/ income ].

E) Net assets are sometimes used as the denominator, and net assets are sometimes used as the numerator.

 

25) During the past year Badger Company had a net income of $175,000. What is the ROI if the investment is $25,000?

A) 0.142

B) 2.500

C) 5.140

D) 7.000

E) 5.450

26) The most popular approach to incorporating the investment base into a performance measure is

A) income on return.

B) opportunity cost.

C) return on investment.

D) residual income.

E) economic value added.

 

27) Paymaster Company provided the following information for the year just ended.

 

Revenue

$200,000

Operating assets

70,000

Net operating income

110,000

Total assets

104,500

 

What is the return on investment?

A) 2.25

B) 1.57

C) 1.05

D) 0.59

E) 0.55

 

Use the information below to answer the following question(s).

 

Thacker Company has two regional offices. The information for each is as follows:

 

 

Edmonton

Sarnia

Revenues

$290,000

$298,000

Total assets

$2,900,000

$4,500,000

Net operating income

$600,000

$1,200,000

 

28) What is the Edmonton Division’s return on investment?

A) 0.21

B) 0.27

C) 0.48

D) 2.06

E) 0.25

29) What is the return on investment for the Sarnia division?

A) 0.21

B) 0.27

C) 0.48

D) 2.06

E) 0.25

 

30) Keeping all other factors constant, which of the following would not cause an increase in the return on investment?

A) actions that increase revenues

B) actions that increase liabilities

C) actions that decrease investments

D) actions that decrease expense

E) actions that increase sales