Deck 14: Performance Measurement

Question 1

A centre that is solely responsible for generating a target level of income is known as a/an:

A) cost centre.
B) profit centre.
C) revenue centre.
D) investment centre.

Answer 1

C

Question 2

In using the balanced scorecard,which of the four perspectives would most likely apply to the measures of 'customer response time' and 'quality training and documentation'?

A) Financial.
B) Customer.
C) Internal operations.
D) Innovation and improvement activities.

Answer 2

C

Question 3

Which of the following could undermine the value of the balanced scorecard to an entity?

A) Using the scorecard as an extra level of top-down management control.
B) Not making available appropriate resources such as training for implementation of the balanced scorecard.
C) Not ensuring that top management are committed to the success of the balanced scorecard.
D) All of the options could undermine the value of the balanced scorecard to an entity.

Answer 3

D

Question 4

When evaluating the performance of divisions:

A) only controllable costs should be identified.
B) both controllable and non-controllable revenues and costs should be identified.
C) only uncontrollable revenues should be identified.
D) none of the options are correct.

Question 5

A responsibility centre for costs,revenues,and investment in assets is a/an:

A) cost centre.
B) revenue centre.
C) profit centre.
D) investment centre.

Question 6

In using the balanced scorecard,which of the perspectives would most likely apply to the goals of 'survive','succeed' and 'prosper'?

A) Financial.
B) Customer.
C) Internal operations.
D) Innovation and improvement activities.

Question 7

Appointing managers to be responsible for the performance of specific divisions of an entity assists in which of the following?

A) Freeing up central management time for strategic long-term planning.
B) Improving the commitment and motivation of managers.
C) Improving the timeliness of and access to information as a result of localised decision making.
D) All of the options are ways in which appointing division managers assists an entity.

Question 8

Which of the following statements regarding the balanced scorecard approach is true?

A) The balanced scorecard uses only short-term performance measures.
B) The balanced scorecard uses only long-term performance measures.
C) The balanced scorecard is used because there is a causal relationship between all of the measures and their economic impact.
D) The balanced scorecard is designed to encourage the use of a wide range of measures to gauge performance.

Question 9

The balanced scorecard framework implies that:

A) traditional performance measures alone are inadequate to capture the entire performance of the entity.
C) only short-term measures need to be considered.
D) non-financial as well as financial measures need to be considered.
D) only long-term measures need to be considered.

Question 10

The format generally used when reporting on divisional performance is a:

A) gross profit format.
B) net profit format.
C) contribution margin format.
D) a balance sheet format.

Question 11

Which one of these perspectives is not used by the balanced scorecard?

A) Employee.
B) Customer.
C) Financial.
D) Innovation and improvement activities.

Question 12

A statement setting out the entity's overall philosophy and objectives is a/an:

A) financial statement.
B) integrated statement.
C) mission statement.
D) income statement.

Question 13

If profit after tax is $600 000,taxation is $280 000,the required rate of return is 15%,and the investment is $2 000 000,the residual income calculation is:

A) $300 000
B) 15%
C) 44%
D) $580 000

Question 14

Which of these is regarded as a disadvantage of return on investment as a performance measure?

A) It links profit with the investment base.
B) It does not take into consideration the different size and type of divisions.
C) It is difficult to calculate.
D) All of the options are disadvantages of return on investment as a performance measure.

Question 15

If the profit margin is 15.5% and investment turnover is 1.3 times,return on investment is:

A) 1.3%
B) 15.5%
C) 20.2%
D) 11.9%

Question 16

One of the main criticisms of the balanced scorecard is:

A) senior management are seldom committed to its success.
B) it must be introduced without a trial.
C) it only measures financial performance.
D) that the causal relationship between some measures and their economic impact have not been tested.

Question 17

A term for a division,segment or branch of an organisation is:

A) business unit.
B) entity.
C) corporation.
D) firm.

Question 18

From the list below,the best financial performance measure for a profit centre would be:

A) cash inflows less cash outflows.
B) budgeted income less actual income.
C) budgeted costs less actual costs.
D) economic value added.

Question 19

A key performance indicator (KPI)is a:

A) performance measure of profitability.
B) performance measure used only by manufacturing entities.
C) performance measure that is critical for the success of an entity.
D) measure of management performance.

Question 20

Reports are prepared on the performance of divisions so as to:

A) help provide a pricing guide for products and services.
B) consider investment levels.
C) evaluate the division's performance.
D) all of the above.

Question 21

Which of the following statements about the economic value added (EVA)performance measure is not true?

A) The charge deducted for the cost of capital can vary depending on the various levels of risk.
B) The formula to calculate EVA uses profit before tax.
C) The adjustments could be manipulated by managers.
D) It is a short-term economic performance indicator.

Question 22

There is a need to combine return on investment (ROI)with long-term performance measures because:

A) ROI is a short-term performance measure.
B) managers can manipulate the ROI for their own benefit.
C) managers may reject an investment because it could decrease the overall ROI.
D) all of the options are true.

Question 23

The first reporting period for entities whose characteristics are covered under the National Greenhouse and Energy Reporting Act commenced on:

A) 1 July 2006
B) 1 July 2008
C) 1 July 2010
D) 1 July 2012

Question 24

If an investment is $400 000,credit sales are $350 000 and cash sales are $200 000,the investment turnover ratio is:

A) 0.73 times.
B) 0.88 times.
C) 1.38 times.
D) 2 times.

Question 25

If the investment turnover ratio changes from 3.3 times to 4.1 times then,no matter what other factors may change,this indicates that:

A) return on investment will be lower.
B) return on investment will be higher.
C) less sales are being generated relative to investment.
D) more sales are being generated relative to investment.

Question 26

A disadvantage of using economic value added as a performance indicator is:

A) complex modifications to the formula.
B) modifications can be manipulated.
C) it is a short-term performance indicator.
D) all of the above.

Question 27

Which of the following is an advantage of the residual income performance measure?

A) It minimises the suboptimal decision making that can stem from the use of ROI.
B) The cost of capital is easy to determine.
C) The required rate of return is easy to determine.
D) It encourages short-term decision making.

Question 28

If the purpose of an entity is to maximise the wealth of its owners,then the performance measure that will ensure managers make decisions in the best interest of the owners is:

A) profit margin.
B) return on investment.
C) residual income.
D) economic value added.

Question 29

An evaluation of the performance of an investment centre is based on:

A) the economic return relative to the resources invested.
B) the gross profit of an investment.
C) a medium-term performance indicator.
D) the manager's manipulation of the financial performance of the investment.

Question 30

If return on investment is 12.5% and investment turnover is 1.2 times,profit margin is:

A) 15%
B) 13.7%
C) 10.42%
D) 9.6%

Question 31

When calculating ROI and RI under the opportunity cost principle the:

A) original cost is used as the investment base.
B) written-down value is used as the investment base.
C) market value is used as the investment base.
D) none of the options would be used when calculating ROI and RI under the opportunity cost principle.

Question 32

Which of these is an investment base that could be used in ROI and RI calculations?

A) All of the options are possible investment bases for ROI and RI calculations.
B) Original cost.
C) Net book value.
D) Current cost.

Question 33

Which of these is a disadvantage of the return on investment performance measure?

A) The relationship between assets and profit are not easily linked.
B) It encourages over-investment.
C) It is difficult to understand.
D) Divisional managers can manipulate ROI by decreasing the investment base.

Question 34

An issue with using the original cost of an investment for the purposes of calculating ROI & RI is that:

A) there may be a delay in the replacement of the asset.
B) the asset may be replaced too early.
C) the calculation is based on today's costs.
D) the calculations will become more favourable over time.

Question 35

If profit before tax is $210 000,required rate of return is 12% and the investment is $1 400 000,the residual income calculation is:

A) 15%
B) $168 000
C) $42 000
D) $1 190 000

Question 36

The Carbon Disclosure Project (CDP):

A) focuses on assisting companies and cities rather than countries.
B) is a not-for-profit organisation.
C) provides a platform to measure, disclose, manage and share environmental information.
D) all of these options are true.

Question 37

Which of the following categories is not used in the Environmental management - Environmental performance evaluation - Guidelines relied upon by the United Nations Division for Sustainable Development (UNDSD)?

A) Social performance indicators.
B) Environmental condition indicators.
C) Operational performance indicators.
D) Management performance indicators.

Question 38

Economic value added is:

A) a long-term performance measure of economic value created over a long period of time.
B) a calculation that does not take into account how the investment is financed.
C) is a measure of the economic increase in an entity's value after an appropriate charge for capital has been deducted.
D) all of the options are true.

Question 39

Emission trading schemes are expected to:

A) promote the generation of renewable energy.
B) provide incentives to businesses and households to consume less energy.
C) all of these options are true.
D) encourage better management of land.

Question 40

Which of the following is a criticism of the Australian Government (2011)Clean Energy Future Legislative Package which sets up the carbon pricing mechanism?

A) Carbon price reporting will burden businesses unnecessarily.
B) It will encourage an increase in offshore investments in countries that do not have a carbon price.
C) The carbon tax is not considered to be significant enough to encourage innovation.
D) All of these options are criticisms of this legislation.

Question 41

Which of the following is a disadvantage of non-financial performance measures?

A) They are not likely to be linked to the goals of the organisation.
B) Various non-financial performance measures can give conflicting results.
C) They usually promote long-term thinking.
D) They can take longer to identify an entity's problems.

Question 42

The investment _______________ ratio measures the amount of sales generated relative to the level of investment.

Question 43

Responsibility centres include cost centres,revenue centres,profit centres and ____________ centres.

Question 44

A ______________ statement is a short statement that sets out the overall philosophy and objectives of an entity.

Question 45

Which of the following statements is not true in relation to measuring individual performance?

A) The individual performance measures should highlight the most important aspect of an employee's job.
B) An example of a short-term incentive for individual employees is the payment of a bonus for meeting targets.
C) Executives' incentive packages should only include financial performance measures.
D) Share options schemes are designed to reward executives for long-term performance.

Question 46

A team-based reward scheme can cause:

A) close attention to each person's performance.
B) individuals to be recognised for outstanding performance.
C) teams to fail to work together.
D) a slack employee to receive a bonus payment.

Question 47

The Kyoto Protocol recommends a cap and trade scheme to help countries reduce their ___________ emissions.

Question 48

Material,energy and water consumption are typical environmental indicators of an organisation's (operational/management)_______________ performance.

Question 49

Environment ____________ indicators provide information about the local,regional,national or global condition of the environment which could be impacted by an entity.

Question 50

Which of the following could be included in a director's salary package?

A) Travel.
B) Additional superannuation contributions.
C) Company car.
D) All of these options could be included in a director's salary package.

Question 51

The ___________ value added performance measure is based on the economic increase in an organisation's value after a suitable charge for capital is deducted.

Question 52

Using Residual Income (RI)as a performance indicator can encourage (short-term/long-term)____________ decision making.

Question 53

Non-financial measures should be:

A) linked to the organisation's goals.
B) limited in number.
C) well-defined.
D) all of the above.

Question 54

With executive remuneration packages,long-term performance is rewarded by:

A) an annual bonus based on achievement of profit targets.
B) fixed salary and superannuation.
C) incentives such as share option plans.
D) a company car.

Question 55

_____________ performance measures are designed to capture performance on multiple tasks,individual and team-based rewards,and short- and long-term rewards.

Question 56

Which of the following is an example of a non-financial employee performance measure?

A) All of these items are examples of a non-financial employee performance measure.
B) Staff educational qualifications.
C) Workers' compensation claims.
D) Percentage of absenteeism.

Question 57

Which of the following is an example of a financial performance measure?

A) Production and delivery lead times.
B) Employee productivity.
C) Process downtime.
D) Return on investment.

Question 58

Non-financial performance measures that help a business keep on track to achieve its goals are generally:

A) balanced.
B) misunderstood.
C) short term.
D) operational.

Question 59

__________________ is the term used to describe the focus on the efficient use of resources to minimise their impact on the environment.

Question 60

If return on sales is 12% and investment turnover is 1.25 times,then the return on investment is ____________.

Question 61

Non-financial performance measures should include _________________ such as past performance,targets,or industry averages.

Question 62

Changes to company __________________ and accounting standards now require large companies to report on director and executive remunerations in their external reports.