Exam 13: Financial Performance Measures and Incentive Schemes

Fine Furnishings Pty Ltd earned residual income of $40 000 during the year.The net profit was $160 000 during the year and the cost of capital was 12 per cent.What was the return on investment for the year?

A group-based reward system is appropriate when: I team work is important,and employees need to work together to achieve organisational goals Ii)it is easy to see individual's effort and performance Iii it is important to discriminate between good performers and bad performers

Extan division of World Corporation reported a residual income of $200 000.The division had $8 million of invested capital and a profit of $1 million.What is the imputed interest rate?

The return on investment of a division will increase if the division is able to:

Carlton division has been stagnant for the past five years,neither growing nor contracting in size and profitability.Investments in new property,plant and equipment have been minimal.Would the division's use of total assets (valued at net book value)when measuring return on investment result in (1)using numbers that are consistent with those in the balance sheet and (2)a rising return on investment over time? Consistent with numbers on the balance sheet Produce a rising return on investment over time

Which of the following statements is/are false? i.Return on investment encourages managers to take a long-term view of corporate performance ii.Return on investment may encourage managers to defer the replacement of worn assets. iii.Return on investment may encourage managers to increase expenditure on research and development.

The Fitzroy division of Brisbane Enterprises has negative residual income of $540 000.Fitzroy's management is considering an investment opportunity that will reduce this negative amount to $400 000.The investment:

Invested capital can be defined as net assets,total assets,productive assets or working capital.

One of the main advantages of return on investment is that it can be used with some responsibility centres to evaluate performance.

White Hills Ltd reported a return on investment of 12 per cent,a capital turnover of 5 and income of $180 000.What was the company's invested capital?

Which of the following gives a more accurate calculation of return on investment and residual income?

Which of the following statements is/are correct?

One of the advantages of using net book value to measure invested capital is that:

Joy Home Fashions reported a return on investment during the year of 6 per cent and a profit margin of 12 per cent.What was the investment turnover for the year?

The advantage of residual income as a measure of investment centre performance is:

Jasmine Dimm is a call centre manager for Tostra,a mobile phone company.Call centre operators at her call centre are responsible for answering calls from Tostra customers.Some calls are very short,relating to simple enquiries.However,a majority of calls tend to be longer,coming from irate customers complaining about Tostra's services.For these calls,customers are often very emotional and sometimes even abusive.Call operators have no control over what types of calls they get.Jasmine has developed a new reward system for her call centre staff.Under the new system,call centre operators are rewarded if they achieve two performance targets: (1)the duration of 90 per cent of the calls is less than 4 minutes and (2)80 per cent of customers rate Tostra's 'customer service quality' as 'excellent'.Achieving these two monthly performance targets will result in a bonus worth 20 per cent of the call operator's monthly salary.Based on expectancy theory,the major limitation(s)of Jasmine's reward system is:

Which of the following are,according to Herzberg,motivating factors?

Which of the following is/are an extrinsic reward?

Return on equity and investment turnover are the components of the expanded return on investment [ROI] formula that enables management to identify ways of improving the ROI.

Richard's Division of Richard and Sons has the following data related to a particular period: Calculate the amount of residual income for the period.