Exam 22: Multinational Performance Measurement and Compensation

Current cost return on investment is a better measure of the current economic returns from an investment than historical cost return on investment.

Which of the following statements is TRUE relative to performance evaluations?

Measurement of one group's performance against the best possible level of performance exhibited by another group,either inside or outside the organization,is known as

Kase Tractor Company allows its divisions to operate as autonomous units.Their results for the current year were as follows: Required: For each division compute the a.return on sales b.return on investment based on total assets employed c.economic value added d.residual income based on net operating income

Batman Abstract Company has three divisions that operate autonomously.Their results for the current year were as follows: The company's desired rate of return is 20%. Required: a.Compute each division's ROI. b.Compute each division's residual income. c.Rank each division by both ROI and residual income.

The three alternatives for increasing return on investment include increasing assets such as receivables,increasing revenues,and decreasing costs.(In all cases assume that all other items stay the same. )

Broughton Industries Ltd.is a publicly traded company and is organized into divisions.The company currently has a stock option plan for its head office executives only and it now is considering establishing an incentive program for its divisional managers.The proposal is to create a bonus pool based on a predetermined percentage of corporate net income after taxes.Divisional managers will be eligible for money from the bonus pool based on achievement of divisional return on investment (ROI).The calculation of the divisional ROI will be based on divisional net income (including an allocation of head office charges)and investment is defined as total assets. Required: Evaluate the proposed incentive plan.What changes would you recommend,if any,to the proposal?

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: The company's desired rate of return is 15%. -What are the respective return on investment ratios for the Toronto and Vancouver divisions?

Which two ratios are used in the DuPont method of profitability analysis to create return on assets?

A part of a control system that articulates the mission,purpose,and core values of a company is known as a(n)

What is the Alpha Division's investment turnover?

ROI,residual income,and economic value-added,can be used as performance measures.

It is more cost-efficient for owners to bear risk than managers,because managers demand a premium (extra compensation)for bearing risk.

Managers use ________ to create an ongoing dialog around the organization's key strategic issues to personally involve themselves in subordinates' decision-making activities.

The economic value added concept has attracted considerable attention in recent years.Explain the attractiveness of this number as a measure of performance.

Use the information below to answer the following question(s). Thacker Company has two regional offices.The information for each is as follows: -What is the return on investment for the Sarnia division?

The timing of feedback depends on the level of management that receives the information and on the complexity of the organization's information technology.

Answer the following question(s)using the information below: Coldbrook Company has two sources of funds: long-term debt with a market and book value of $15 million issued at an interest rate of 10%,and equity capital that has a market value of $9 million (book value of $5 million).Coldbrook Company has profit centres in the following locations with the following operating incomes,total assets,and current liabilities.The cost of equity capital is 15%,while the tax rate is 30%. -What is the for Brooksville?

A control system that describes standards of behaviour and codes of conduct expected of all employees,especially actions that are off-limits,is known as a(n)

The absence of good performance measures restricts the owner's ability to motivate managers through