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| 1 | |
Which of the following is not an example of an extrinsic reward? |
| | A) | Cash bonus. |
| | B) | Share options. |
| | C) | Company car. |
| | D) | Employee job satisfaction. |
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| 2 | |
In Herzberg’s two-factor theory of work motivation, motivators work because they create: |
| | A) | hygiene factors |
| | B) | extrinsic rewards |
| | C) | improved wages and working conditions |
| | D) | intrinsic rewards |
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| 3 | |
Which of the following will not increase the return on investment? |
| | A) | Increasing sales revenues. |
| | B) | Decreasing liabilities. |
| | C) | Decreasing costs and increasing revenues. |
| | D) | Decreasing investments. |
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| 4 | |
The Stanley Division of Knave Knife Company reports a profit of $3.2 million. Divisional invested capital totals $2.0 million and the imputed interest rate is 10%. On the basis of this information, Stanley’s residual income is: |
| | A) | $3.2 million |
| | B) | $3.0 million |
| | C) | $1.2 million |
| | D) | $2.0 million |
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| 5 | |
The Yarra Company has a return on investment of 8%. The Darebin Division of the Yarra Company has a 9% return on investment (ROI) and $550 000 of residual income. The Darebin Division is currently considering a large investment that will (1) reduce divisional ROI and (2) produce $200 000 of residual income. If Darebin strives for goal congruence, the investment: |
| | A) | should not be acquired because it reduces divisional ROI |
| | B) | should be acquired because it produces $200 000 of residual income |
| | C) | should not be acquired because it produces $200 000 of residual income |
| | D) | should be acquired because it reduces the divisional ROI |
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| 6 | |
In 2006, the profit after tax (NOPAT) for the Springthorpe Company is $3 500 000 and the capital employed is $10 000 000. The company obtains its funds from long-term debt and equity and its weighted average cost of capital is 5%. The economic valued added (EVA®) is: |
| | A) | $500 000 |
| | B) | $3 000 000 |
| | C) | $3 500 000 |
| | D) | $10 000 000 |
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| 7 | |
The formula for EVA® resembles that of: |
| | A) | residual income |
| | B) | return on investment |
| | C) | market value added |
| | D) | shareholder value added |
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| 8 | |
Consider the following statements regarding EVA®:
A strategy to maximise EVA® is to improve profitability without employing any additional capital.
A strategy to maximise EVA® is to borrow additional funds if the firm can earn profits on those funds which are in excess of the cost of borrowing.
A strategy to maximise EVA® is to pay off debt by selling assets, as long as the savings in reduced interest are greater than profits lost through reducing the asset base.
A strategy to maximise EVA® is to increase the weighted average costs of capital and maintain the current net profit after tax and level of capital employed.
Which of the above statements is (are) correct? |
| | A) | i. |
| | B) | ii and iii. |
| | C) | i, ii and iii. |
| | D) | i, ii, iii and iv. |
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| 9 | |
A performance-related pay system that rewards employees with cash bonuses when the performance of the company, or their segment of the company, exceeds some performance target is called: |
| | A) | an employee share plan |
| | B) | a profit-sharing plan |
| | C) | gainsharing |
| | D) | a team-based incentive system |
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| 10 | |
Measures of shareholder value include which of the following? |
| | A) | Economic value added (EVA®), shareholder value added (SVA) and total shareholder returns (TSR). |
| | B) | Economic value added (EVA®), market value added (MVA), shareholder value added (SVA) and total community returns (TCR). |
| | C) | Economic value added (EVA®), market value added (MVA), human resources value added (HRVA) and total community returns (TCR). |
| | D) | Economic value added (EVA®), market value added (MVA), product value added (PVA) and total community returns (TCR). |
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