Exam 13: Financial Performance Measures and Incentive Schemes

The following information pertains to Bingo Concrete for the year 2008: Sales are $1 500 000 Gross margin is $600 000 Profit is $90 000 What is the profit margin for the year?

The profitability of an investment centre can best be evaluated by:

The northern division of Aussie Estates has reported a profit of $4 million.Divisional invested capital is $2.5 million and the imputed interest rate is 12 per cent.What is the residual income?

Richard's Division of Richard and Sons has the following data related to a particular period: Calculate the investment turnover (rounded)for the period.

All the following actions will increase return on investment except:

The following information is available for Jittie Ltd: The WACC for Jittie Ltd is:

Which of the following items do not form part of the economic value added calculation?

Net book value produces a misleading increase in return on investment because:

Jasmine Dimm is a call centre manager for Tostra,a mobile phone company.Call centre operators at her call centre are responsible for making sales calls to customers to promote Tostra's new products.Jasmine sets two performance targets for her operators: sales and average call duration.Every 6 months,any call centre operator who can achieve both targets go into a random draw with a one-in-ten chance to win a $50 supermarket giftcard.All her call centre operators agree that these two targets are clearly specified,objectively measured and achievable with hard work.However,all the call centre operators are still unhappy with the new reward system.According to the expectancy theory,this is because:

Expectancy theory relates employee motivation to valence,expectancy and instrumentality.

Which of the following statements is/are correct when describing expectancy theory? i.The preference that an employee has for a particular reward is called valence ii.Expectancy is the likelihood of achieving the performance necessary to earn the reward. iii.An individual's perception that the effort put into a task will lead to a specific reward outcome is fundamental to expectancy theory.

Which of the following information is required to compute SVA (shareholder value added)? i.PV of cash flows from operations for a certain time period Ii Residual value of the business Iii EVA

The formula for economic value added and the residual income are interchangeable.

Which of the following is the correct mathematical expression for return on investment?

Which of the following is an example of an intrinsic reward?

Designing reward systems is an easy process and is a definite way of ensuring goal-congruence.

Which of the following measures of performance is based,in part,on weighted average cost of capital?

Sunrise Dairies has a return on investment of 15 per cent.A Sunrise division,which currently has a return on investment of 13 per cent and $750 000 of residual income,is contemplating a large investment that will (1)reduce divisional return on investment and (2)produce residual income of $120 000.If Sunrise strives for goal congruence,the investment:

Which of the following are value drivers (i.e.create value for the business)? i.Growth ii.Sustainability iii.Spread iv.Cost of capital

Which of the following statements about developing reward system is incorrect?