Question : 51. Which of the following statements regarding ROI computations istrue? A. Net income : 1291625

51. Which of the following statements regarding ROI computations istrue? A. Net income after interest and taxes is most frequently used as the measure of income in the ROI formula.B. The fair market value of assets without regard to depreciation is used as a measure of operating assets in the ROI formula.C. Assets used in the ROI formula are generally measured as an average of beginning and end of period numbers.D. All assets, including those that are idle or held for resale, are included in the ROI formula.

52. Residual income: A. is most useful as a way to compare individual divisions of different sizes.B. is the amount of income earned in excess of a predetermined minimum rate of return on assets.C. should not be used as a way to evaluate the manager of an investment center.D. is often called economic value added (EVA).

53. Residual income: A. is an alternative to ROI for manager performance evaluation..B. is the amount of income earned in excess of a predetermined minimum level of return on assets.C. is equal to ROI – (Average operating assets ´ Minimum required rate of return)D. both A and B.

54. Which of the following statements comparing ROI and residual income is correct? A. ROI is more useful as a performance measure for a single investment center.B. Residual income is a better comparative measure than ROI.C. ROI and residual income are equally good performance measures for a single investment center.D. Residual income is more useful as a performance measure for a single investment center.

55. Which of the following is the correct formula to compute residual income? A. Average operating assets – Net operating incomeB. Average operating assets – (Net operating income ´ Minimum required rate of return)C. Net operating income ´ Minimum required rate of returnD. Net operating income – (Average operating assets ´ Minimum required rate of return)

56. Duncan Ltd. has the following information available for one its divisions in the current year: 

Sales revenue

$3,000,000

Operating expenses

1,750,000

Average operating assets

4,000,000

Duncan requires each of its divisions to generate a minimum return of 20%. What is this division’s residual income? A. $200,000B. $450,000C. $700,000D. $1,250,000

57. Shannon Pharmaceuticals has the following information available for one of its divisions in the current year: 

Sales revenue

$10,000,000

Operating expenses

4,500,000

Average operating assets

4,000,000

The company requires each of its divisions to generate a minimum return of 30%. What is this division’s residual income? A. $1,500,000B. $4,300,000C. $2,350,000D. $8,800,000

58. ABC Inc. has the following information available for one of its divisions: 

Average operating assets

$7,000,000

Return on investment (ROI)

25%

Sales

$6,000,000

If ABC requires a minimum return on its investments of 20%, what is their residual income? A. $1,500,000B. $6,000,000C. $1,750,000D. $350,000

59. When comparing two different investment alternatives of different sizes, which of the following measures for each alternative would be the best to use? A. Return on investmentB. Residual incomeC. Net incomeD. Contribution margin ratio

60. Which of the following statements about the balanced scorecard approach is true? A. The four perspectives of the balanced scorecard revolve around measures of quality, productivity, efficiency and timeliness, and marketing success.B. The balanced scorecard approach requires looking at performance from four different but related perspectives: financial, customer, internal business, and learning and growth.C. The balanced scorecard approach integrates financial and nonfinancial performance measures.D. All of these are true.