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| 1 | |
The value drivers that are related to financing and valuation of a business include: |
| | A) | spread, growth, sustainability and equity |
| | B) | range, growth, sustainability and cost of capital |
| | C) | spread, growth, sustainability and cost of capital |
| | D) | range, growth, sustainability and equity |
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| 2 | |
The incentives created by using net book value for asset measurement, when calculating return on investment (ROI) over a number of years, include: |
| | A) | declining return on investment when diminishing value depreciation method is used |
| | B) | declining return on investment when straight-line depreciation method is used |
| | C) | declining return on equity when straight-line depreciation method is used |
| | D) | increasing return on investment regardless of the depreciation method used |
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| 3 | |
In 2007, the profit after tax of the Seaspray Company is $350 000 and the capital employed is $500 000. The company obtains its funds from long-term debt and equity and the weighted average cost of capital is 5%. The EVA® is: |
| | A) | $250 000 |
| | B) | $325 000 |
| | C) | $350 000 |
| | D) | $850 000 |
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| 4 | |
Which of the following statements is false? |
| | A) | Group reward systems encourage employees to identify with the group. |
| | B) | Group reward systems do not discriminate between employees who are good performers and those who are bad performers. |
| | C) | Group reward systems may discourage excessive competitiveness between employees. |
| | D) | Group reward systems may encourage employees to make dysfunctional decisions to maximise their own individual performance. |
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| 5 | |
The Collingwood Company has a return on investment of 5% and a sales margin of 10%. The capital turnover is: |
| | A) | 5% |
| | B) | 10% |
| | C) | 20% |
| | D) | 50% |
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| 6 | |
A method of encouraging a long-term focus is to: |
| | A) | defer a manager’s incentive payments for some years |
| | B) | pay bonuses quarterly |
| | C) | pay bonuses annually based on return on investment (ROI) |
| | D) | pay bonuses at the annual performance review |
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| 7 | |
Essendon Company reported a return on investment of 10%, a capital turnover of 50% and a profit of $200 000. The company’s invested capital was: |
| | A) | $200 000 |
| | B) | $1 500 000 |
| | C) | $2 000 000 |
| | D) | cannot be calculated from the given information |
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| 8 | |
Essendon Company reported a return on investment of 10%, a capital turnover of 50% and profit of $200 000. The company’s sales revenue was: |
| | A) | $200 000 |
| | B) | $1 000 000 |
| | C) | $1 500 000 |
| | D) | cannot be calculated from the given information |
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| 9 | |
When an organisation allows divisional managers to be responsible for short-term bank loans and employee entitlements, such as the provision for long service leave, the division’s invested capital should be measured by: |
| | A) | total assets |
| | B) | total liabilities less current liabilities |
| | C) | total assets less current liabilities |
| | D) | total assets less total liabilities |
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| 10 | |
Bakery Products Company has three operating divisions. Overall, the Bakery Products Company has a return on investment (ROI) of 10% and its Bagel Division has an ROI of 15%. If Bakery Products evaluates its managers on the basis of ROI, how would the Bagel Division’s manager and the Bakery Product Company’s managing director react to a new investment that has an estimated ROI of 12%? |
| | A) | Bagel Division’s manager and the Bakery Products Company’s managing director would accept the investment. |
| | B) | Bagel Division’s manager would accept the investment, but the Bakery Products Company’s managing director would reject the investment. |
| | C) | Bagel Division’s manager would reject the investment, but the Bakery Products Company’s managing director would accept the investment. |
| | D) | Bagel Division’s manager and the Bakery Products Company’s managing director would reject the investment. |
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