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Which of the following statements is NOT a weakness of using return on investment (ROI) to
evaluate performance?
 
ROI does not include the investment in nonoperating assets, such as land held for investment or s
tock in other companies.
   
The manager of a(n) ______ center does not have control over revenue or the use of investment funds.
 
Cost
   
Which of the following capital budgeting decision tools focuses on net operating income rather than cash flows?
 
a.) Accounting rate of return
b.) Profitability index
c.) Net present value
d.) Internal rate of return
   
Studio Films is considering the purchase of some new film equipment that costs $150,000.
 
The new equipment is expected to increase revenues by $115,000 annually.
   
Total annual operating expenses are expected to be $70,000.
The accounting rate of return of the equipment is %.
 
30
   
accounting; rate
   
The minimum required rate of return is also known as the _____ rate.
 
hurdle
   
Net cash flow differs from net income because of ______.


a.) the payback period
b.) the accounting rate of return
c.) accrual-based accounting
d.) capital budgeting decisions
   
True or false: An advantage of the accounting rate of return (ARR) is that it uses net income to
evaluate capital investments.
 
False
   
Backing out interest to find the equivalent value in today's present dollars is called _____.
 
discounting
   
A stream of cash flows that occur uniformly over time is a(n) ______.


a.) future value
b.) payback
c.) present value
d.) annuity
   
Net present value is ______.


a.) the difference between the present value of cash inflows and present value of cash outflows for a project
b.) a capital budgeting technique that ignores the time value of money
c.) inferior to the payback method when doing capital budgeting
d.) used to determine if a project is an acceptable capital investment
   
The discount rate ______.


a.) equals the profitability index
b.) should reflect the company's cost of capital
c.) is multiplied by all present cash flows to discount them
   
The cost of capital is the ______.


a.) weighted average after tax cost of debt and cost of equity
b.) sum of all cash outflows required for a capital investment
c.) initial cash outlay required for a capital investment project
   
When the discount rate increases a project is more likely to be acceptable because its
net present value will also increase.
 
False
   
The internal rate of return is the discount rate that results in a net present value
of _____ for the investment.
 
zero
   
The weighted -average cost of capital ______.


a.) is how much it costs a company to fund capital projects
b.) should be reflected in the company's discount rate
c.) averages the after-tax cost of debt and average asset investment
   
The internal rate of return is compared to the _____ of _____ when analyzing the acceptability
of an investment project.
 
cost capital
   
Which of the following statements are true?


a.) The internal rate of return method makes an assumption about reinvesting cash flows that
      may not be realistic.
b.) The net present value method is generally preferred over the internal rate of return method
      when making preference decisions.
c.) Unlike the internal rate of return method, the net present value method assumes that cash flows.
d.) The net present value and internal rate of return methods provide consistent information
      when making screening decisions.
   
The hurdle rate is the ______ rate of return on an investment.


a.) maximum allowable
b.) minimum acceptable
c.) desired
   
The time that it takes for a project to recoup its original investment is the _____ period.
 
payback
   
The basic premise of the payback method is ______.
a.) projects with longer payback periods are more desirable with shorter payback periods
b.) the higher the net present value, the more desirable the investment
c.) projects with shorter payback periods are safer investments than projects with longer payback periods
d.) the lower the internal rate of return, the more desirable the investment
   
Major limitations of the accounting rate of return method for evaluating capital investment
proposals include that it ______.


a.) is based on net income instead of net cash flows
b.) is calculated using cash flows rather than revenue and expense
c.) is a simple and intuitive approach
d.) ignores the time value of money
   
To convert net income to net cash flow, add back _____ expense.
depreciation
   
A project's payback period is the ______.


a.) length of time it takes for the project to recover its initial cost from the net cash inflows generated
b.) length of time it takes for the project to begin to generate cash inflows
c.) useful life of the capital asset purchased
d.) estimated length of the capital investment project from the initial cash outflow to the end of the project
   
When making a capital budgeting decision, it is most useful to calculate the payback period ______.


a.) as part of the screening process
b.) as part of the preference decision process
c.) when the company is concerned with the time value of money
   
Shortcomings of the payback period include it ______.


a.) cannot be used to evaluate projects with uneven cash flows
b.) does not consider the time value of money
c.) does not indicate how long it takes to recoup the investment
d.) ignores cash flows that occur after the payback period
   
Some of the cash flows received over the life of a project are generally ignored when using
the _____ method.
 
payback
   
When the dollar amount of interest earned on a given investment increases every year,
 ______ interest is in force.
 
compound
   
Capital budgeting techniques involve solving _____ _____ problems because of the need to know how
much something is worth today.
 
present; value
   
The opposite of compounding is _____.
discounting
   
The minimum acceptable transfer price using the cost-based method is ______.
variable cost
   
A transfer price developed using the ___ method should fall somewhere between the variable
cost and the wholesale price.
 
negotiation
   
When a department has enough idle capacity to supply a part to another division within the
company without interrupting current sales, ______.
 
the department is likely to accept a relatively low transfer price
   
Transfer prices are not particularly important when managers are evaluated on ______.
 
total firm value
   
Investing in new technology to save on labor costs is an example of a(n) ___ decision.
 
capital budgeting
   
For capital budgeting purposes, capital assets includes item research and development projects.
 
True
   
The two types of capital investment decisions are ______ and ______ decisions.
 
screening; preference
   
Managers are required to evaluate and compare more than one capital investment alternative
when making a(n) ___ decision.
 
preference
   
A tool to help managers make decisions about investments in major assets such as new facilities,
equipment, and products is called ___.
 
capital budget
   
The two types of capital investment decisions are ___ decisions ___ and decisions.
 
preference; screening
   
Narrowing down a set of projects for further consideration is a(n) ___ decision.
 
screening
   
When projects are ___ or unrelated to one another, each project can be evaluated on its own merit.
 
independent
   
True or false: Preference decisions are made to prioritize and select from capital budgeting alternatives.
 
True
   
Capital investment methods that ignore the time value of money are referred to as ___-___ methods.
 
Non-discount
   
Deciding whether to purchase or lease a vehicle is an example of a(n) ______ project decision.
 
mutually exclusive
   
When two projects are ______, investing in one of the projects does not preclude investing in the other.
 
independent
   
Interest earned on top of interest is called _____.
 
Compounding
   
Which of the following capital budgeting decision tools focuses on net operating income rather than cash flows?
 
Accounting rate of return
   
An organization in which decision-making authority is spread throughout the organization is ___.
 
decentralized
   
Decision-making authority is kept at the very top when an organization is ___.
 
Centralized
   
Synonyms for the accounting rate of return are the ______ rate of return and the ______ rate of return.
 
simple; unadjusted
   
A balanced scorecard includes leading indicators but NOT lagging indicators.
 
False
   
Measuring the value provided to shareholders is the ______ perspective of the balanced scorecard.
 
financial
   
In decentralized organizations, decision-making authority is ______.
 
spread throughout the organization
   
Decision-making authority lies mostly with higher-level managers in strongly ______ organizations.
 
Centralized
   
Poppy's Gumball Co. is planning to invest in a new marketing campaign that would require an initial
investment of $85,000. The project is expected to generate net income of $27,200.
The accounting rate of return on the project is ______.
 
32%
   
Lower-level management goals that are inconsistent with company goals are a possible disadvantage of ___.
 
decentralization
   
The four groups of performance measures typically used in the balanced scorecard approach are financial, ______.
 
customer, internal business processes, and learning and growth
   
The minimum required rate of return is also known as the ___ rate.
 
hurdle
   
Studio Films is considering the purchase of some new film equipment that costs $150,000.
The new equipment is expected to increase revenues by $115,000 annually.
Total annual operating expenses are expected to be $70,000.
The accounting rate of return of the equipment is ___%.
 
30
   
Evaluating how the company will sustain the ability to change and improve is part of
the ______ perspective of the balanced scorecard.
 
learning and growth
   
In strongly decentralized organizations, even the lowest-level managers can make decisions.
 
True
   
An advantage of the accounting rate of return (ARR) is that it uses net income to evaluate capital investments.
 
False
   
Which of the following statements regarding the balanced scorecard is incorrect?
 
Balanced scorecard objectives are generally broad and generic.
   
The link between internal business processes and financial results is the ___ perspective of
the balanced scorecard.
 
Customer
   
A company's sales for the year total $218,000. Cash expenses for the year were $92,000 and
depreciation expense was $23,000. The company's net cash flow for the year is ______.
 
$126,000
   
Which of the following statements regarding the balanced scorecard are true?
A balanced scorecard includes several different performance measures that can be used to assess
how well a business is accomplishing its mission.
A balanced scorecard includes financial performance measures such as ROI.
A balanced scorecard includes nonfinancial measures such as defect rates or on-time deliveries.
All of these answers are correct
   
The balanced scorecard perspective that focuses on all activities from product design and development
until the time it is in the hands of the customer is ___.
 
internal business processes
   
The time that it takes for a project to recoup its original investment is the ___ period.
 
payback
   
Farm Central is considering the purchase of a larger combine to increase productivity.
Combine A costs $210,000 and has a useful life of 10 years.
The combine will reduce labor costs by $25,000 per year.
The payback period of the combine is ______ years.
 
8.4
   
Responsibility centers can be based on ___ regions, ___ lines, ___ characteristics, or some combination of the three.
geographical; product; functional
   
According to the ______ managers should only be held accountable for what they are actually in charge of.
 
controllability principle
   
Tilly's Travels purchased a new tour bus at a cost of $320,000.
The bus is expected to increase cash inflows over the next 5 years as follows:
 
$98,000 in year 1
$87,500 in year 2
$74,500 in year 3
$60,000 in year 4
$59,000 in year 5
 
The payback period for the new bus is ___ years.
 
4
   
A company's net operating income for the year is $118,000.
Depreciation expense for the year equals $23,000. The company's net cash flow for the year is ______.
 
$141,000
   
Which of the following business segments would not be considered a cost center?
 
Retail outlet
   
Spicer Dentistry is considering the purchase of a new x-ray machine.
The machine costs $2,400 and has a useful life of 10 years.
The new machine is expected to reduce operating costs by $400 per year.
The payback period for the x-ray machine is ___ years.
 
6
   
The manager of a(n) ___ center does /not/ have control over revenue or the use of investment funds.
 
Cost
   
Sandy's Soda Co. is planning an investment in new cooling equipment that would cost $56,000.
The new equipment would save on operating costs over the next 5 years as follows:
 
$21,500 in year 1
$23,100 in year 2
$19,000 in year 3
$13,900 in year 4
$15,200 in year 5
 
The payback period for the cooling equipment is ______ years,
 
2.6
   
To convert net income to net cash flow, add back ___ expense.
 
depreciation
   
Revenue center managers are evaluated primarily on their ______.
 
ability to meet sales goals
   
An area of business that a manager has control over and is accountable for is called a(n) ___ center.
 
responsibility
   
One of the most important concepts in responsibility accounting is the ___ ____ which states that
managers should only be held responsible for what they are in charge of.
 
controllability; principle
   
As the cost of capital (discount rate) decreases, the net present value of a project will ______.
 
increase
   
The internal rate of return method indicates ______.


a.) the discount rate that makes the present value of the cash inflows equal to the present value of the cash outflows
b.) the discount rate that is equal to the project's minimum required rate of return
c.) a discount rate of zero
   
An advantage of IRR over NPV is that it is stated ______.


a.) as an absolute dollar value
b.) on a relative basis
   
To determine if a project is acceptable, compare the internal rate of return to the company's ______.
 
cost of capital
   
The ratio of a project's benefits (measured by the present value of future cash flows) to its required investment is the _____ _____.
 
Profitability; index
   
Cost centers have no impact on revenue.
 
False
   
Managers of cost centers are expected to:
 
minimize costs and maximize cost-effectiveness
   
Some of the cash flows received over the life of a project are generally ignored when using the ___ method.
 
payback
   
Interest earned on top of interest is called ___.
 
compounding
   
The opposite of compounding is ___.
 
discounting
   
The concept that the worth of a dollar changes over time is known as the ___ of ___.
 
time value; money
   
The term discounting cash flows refers to the process of calculating the ______ value of the cash flows.
 
present
   
A stream of equal cash flows is called a(n) ___.
 
annuity
   
When the dollar amount of interest earned on a given investment increases every year, ______ interest is in force.
 
compound
   
Sales quotas are often given to ___ center managers.
 
profit
   
The manager of a(n) ___ center has control over both costs and revenues, but not over the use of ___ funds.
 
profit; investment
   
A(n) ___ income statement is broken down by product line, region, or other area of a business.
 
Segment
   
Calculating the present value of money is referred to as ___ cash flows.
 
discount
   
A stream of cash flows that occur uniformly over time is a(n) ______.
 
annuity
   
Which of the following is NOT an assumption of discounted cash flow methods?
 
Cash flow and net income will always be equal.
   
The Copy Center can purchase a new copier for $15,000. It would last for 3 years and have a
salvage value of $3,000. Depreciation cost would be $4,000 per year and cash operating costs
would equal $1,000 per year. The same copier could be leased for $6,500 per year.
Using a discount rate of 7%, and the tables in Supplement 11A, it is best to ___(buy/lease)
the copier because the difference in cost is $___.
 
buy; 1883
   
An advantage of IRR as compared to NPV is that IRR ______.


a.) is generally easier for managers to interpret
b.) makes a more realistic assumption about the reinvestment of cash flows
c.) makes it easier to compare projects of different sizes
d.) is the only method of the two that can be used for both preference and screening decisions
   
When prioritizing independent projects when limited investment funds are available, the best capital budgeting method to use is the ______.
 
profitability index
   
The most common method of evaluating a profit center manager is based on the ______.
 
segmented income statement
   
Sensitivity analysis should only be used when evaluating mutually exclusive capital investment decisions.
 
False
   
Adele's Inc. is considering investing in a piece of equipment to automate some operations.
It will cost $180,000 and last 4 years with no salvage value. Sales are not expected to be impacted,
but estimated savings in labor and other costs will be $60,000 per year. Annual depreciation expense
will be $45,000. Using a discount rate of 8%, and the tables in Supplement 11A, the net present value of the investment is $___.
 
18,726
   
A(n) ___ fixed cost is under the control of a segment manager and a(n) ___ fixed cost is outside the segment manager's control.
 
direct; common
   
To have $15,000 available for a down payment on a house 5 years from now, you need to invest $___ today at 7% compounded annually.
 
$10,695
   
Which type of manager(s) have the authority to make purchase decisions regarding company assets?
 
Investment center managers only
   
Which of the following statements are true?
 
A profit manager is accountable for direct fixed costs.
A direct fixed cost supports a specific business segment.
Common fixed costs are commonly incurred at higher levels of an organization.
   
The manager of a(n) ___ center has control over costs, revenue, and purchasing long-lived company's assets.
 
investment
   
Given beginning operating assets of $140,000, ending operating assets of $180,000, net operating
income of $40,000, and tax expense of $8,000, return on investment is equal to ___%.
 
25
   
Return on investment (ROI) is a measure used to evaluate managers of ______ centers.
 
Investment
   
If the interest rate earned increases, net present value will ______.
 
decrease
   
A monthly house or car payment is an example of a(n) ___.
 
annuity
   
Unlike other capital investments, the decision framework for ___ projects should evaluate benefits that go beyond economics.
 
sustainability
   
Using the tables from the Appendix, and an interest rate of 8% compounded annually, $5,000
to be received four years from today is equal to ______ today.
 
$3,675
   
Calculate the present value of a 10-year, 6% loan with annual payments of $7,500 made
at the end of each year using the tables in the appendix.
 
$55,201
   
Assume the net present value of $1,000 to be received in four years is $645. If you have the choice
of receiving $645 now or $1,000 in four years, the best option is to take the $1,000 in four years.
 
False
   
Equal interest rates, interest periods, and dollar amounts each interest period are all characteristics of ______.
 
annuities
   
Investment turnover × profit margin = ______ on investment.
 
return
   
The formula for return on investment is ______ operating income ÷ average invested assets.
 
net
   
Net operating income is net income from normal operating activities, before other income, ___, and ___.
 
interest taxes
   
Macey, Inc.'s investment center had invested assets at the beginning of the year of $300,000.
Ending invested assets totaled $400,000. Total revenue for the year was $1,050,000, and net
operating income was $70,000. Return on investment was ______.
 
20%
   
An investment offers you $750 per year for 20 years starting at the end of this year.
At an interest rate of 3.75%, the investment is worth $___ today.
 
$10,422
   
ROI is a method used to evaluate ______ centers, but not cost or profit centers.
investment
   
In order to fully evaluate ROI, managers should compute both ___ and ___ turnover.
profit margin; investment
   
Spicer, Inc. is considering purchasing a piece of equipment that will cost $80,000 and generate the
following cash flows: Yr. 1 = $25,000; Yr. 2 = $40,000; and Yr. 3 = $45,000. Using a discount rate of
9% and the tables in Supplement 11A, the net present value rounded to the nearest dollar is $___.
 
$11,352
   
As the cost of capital (discount rate) decreases, the net present value of a project will ______.
 
increase
   
The rate applied to future cash flows to reflect the time value of money is called the ___ rate.
 
discount
   
Net operating income ÷ Sales revenue = ______.
 
Profit margin
   
A project with a(n) ___ net present value creates economic value for a company whereas a
project with a(n) ___ net present value reduces a firm's economic value.
 
positive; negative
   
How can a company increase its return on investment (ROI)?
 
Increase sales
Reduce operating expenses
   
Valley Manufacturing reported sales of $800,000, net operating income of $40,000, and average
invested assets of $400,000. Based on this, Valley's investment turnover is ___, its profit margin
is ___%, and its return on investment is ___%.
 
2; 5; 10
   
Residual income can be broken down into profit margin and investment turnover.
 
False
   
Sales revenue divided by average invested assets equals ___.
 
investment turnover
   
In order to increase return on investment (ROI), the company must ___ (increase/decrease) sales,
and/or ___ (increase/decrease) operating expenses and/or ___ (increase/decrease) average operating assets.
 
increase; decrease; decrease
   
The required rate of return is also known as the ___ rate.
hurdle
   
The net operating income that an investment center earns above the amount required to
earn the minimum required rate of return is ______.
 
residual income
   
When choosing among independent projects, ______.


a.) investment resources must be prioritized
b.) accepting one precludes accepting another
c.) managers should use the internal rate of return to prioritize the projects
   
Which of the following statements are true?


a.) The payback method is best used for preference decisions.
b.) Capital budgeting techniques that use time value of money are superior to those that don't.
c.) Any capital budgeting technique can be used for screening decisions.
d.) The IRR method is best for evaluating mutually exclusive projects.
   
When resources are limited, mangers should prioritize independent projects based on the _____ _____.
 
profitability index
   
Equal interest rates, interest periods, and dollar amounts each interest period are all characteristics of ______.
 
annuities
   
A monthly house or car payment is an example of a(n) _____.
 
annuity
   
Carlos, Inc. requires a minimum rate of return of 10% on its average operating assets.
The housewares department currently has average invested assets of $200,000 and a net
operating income of $24,000. The department's residual income is $___.
 
4,000
   
When managers are evaluated on residual income, rather than on return on investment (ROI),
they will be ___ (more/less) likely to pursue projects that will benefit the entire company.
 
more
   
The amount that one division charges when it sells goods or services to another division of the same company is called a(n) ___.
 
transfer price
   
Business transactions between units or divisions are commonly known as ______.
 
related-party transactions
   
Which of the following methods is /not/ commonly used to set transfer prices?
 
Arbitration-cost
   
Return on investment, residual income, and economic value added are all lagging measures of ______.
 
performance
   
The price charged when one segment of a company provides goods or
services to another segment of the same company is the ______ price.
 
transfer
   
Business transactions between units or divisions of the same company are called ___ - ___ transactions.
 
related; party
   
When considering transfer prices, one factor is the overall company's perspective.
 
False
   
The transfer pricing method that treats the two segments as if they were independent businesses is the ______ method.
 
market-price
   
When a transfer price is based on cost plus a percentage markup, the method being used is ______.
 
cost-based
   
Inside information about the other division's costs, capacity, and demand will impact setting a transfer
price using the ______ method.
 
negotiation
   
The transfer pricing method that generally provides the most benefit to the seller is the ______ method.
 
market-price
   
If you have $1,000 now and want to know what it will be worth in 3 years, you are solving a(n) _____ _____ problem.
 
future value
   
Assembling products and handling baggage are examples of ______ processes.
 
internal business
   
When two projects are ______, investing in one of the projects does not preclude investing in the other.
 
independent
   
Net present value, internal rate of return, and profitability index are referred to as _____ _____ _____ methods
because they incorporate the time value of money.
 
discounted cash flow
   
True or false: When two projects are mutually exclusive, investing in one does not eliminate the other one from consideration.
 
False
   
Unlike other capital budgeting methods, the accounting rate of return method focuses on ______, rather than ______.


a.) cash flows, net operating income
b.) the initial investment, the salvage value
c.) the salvage value, the initial investment
d.) net operating income, cash flows
   
Non-discounting methods of evaluating capital investments are ______.


a.) accounting rate of return
b.) payback
c.) net present value
d.) internal rate of return
   
The principle that money is more valuable today than it will be in the future is referred to as the _____ _____ of _____.
 
time value money
   
Synonyms for the accounting rate of return are the ______ rate of return and the ______ rate of return.


a.) simple, unadjusted
b.) simple, internal
c.) internal, payback
d.) simple, cash flow
   
Discounted cash flow methods ______.


a.) incorporate the time value of money
b.) are generally superior to non-discounting methods
c.) include the accounting rate of return
d.) include the profitability index
   
Which of the following statements is INCORRECT regarding the use of financial indicators as performance measures?
 
Financial performance is the responsibility of lower-level supervisors and managers who are in charge of
the company's daily operations.
   
Which of the following statements regarding a balanced scorecard is INCORRECT?
 
The scorecard should provide an opportunity for subordinates to evaluate their superiors
   
An integrated set of performance measures that are derived from the company's strategy is _____.
 
a balanced scorecard
   
The two types of capital investment decisions are _____ decisions and _____ decisions.
 
screening, preference
   
Narrowing down a set of projects for further consideration is a(n) _____ decision.
 
screening
   
True or false: Preference decisions are made to prioritize and select from capital budgeting alternatives.
 
true
   
Typical capital budgeting decisions include ______.


a.) lease or buy decisions
b.) research and development projects
c.) employee hiring and firing decisions
d.) equipment selection decisions
e.) product and service pricing decisions
   
For capital budgeting purposes, capital assets includes item research and development projects.
 
true
   
When projects are _____ or unrelated to one another, each project can be evaluated on its own merit.
 
independent
   
Deciding whether to purchase or lease a vehicle is an example of a(n) ______ project decision.


mutually exclusive
   
The balanced scorecard:
 
incorporates both financial and nonfinancial measures
helps employees to understand the strategy of the company
may include ROI and residual income in its coordinated system of performance measures
   
The balanced scorecard:
 
links the organization's strategy to its financial budgets
helps managers communicate the organization's strategy to their subordinates
helps to ensure employees understand the organization's strategy
   
A screening decision ______.


a.) is used to determine if a project is a candidate for further consideration
b.) relates to whether a proposed project is the best option among more than one acceptable project
c.) is made after a capital budgeting project is accepted
d.) relates to whether a proposed project meets some minimum criteria
   
The manager of a(n) ________ center has control over both costs and revenues, but not over the use of _____ funds.
 
profit; investment
   
Which of the following statements are true?


a.) The time value of money should be considered in capital budgeting decisions.
b.) Money is more valuable today than it will be in the future.
c.) The payback method is a discounted cash flow method.
   
Investing in new technology to save on labor costs is an example of a(n) _____ _____ decision.
 
capital; investment
   
The discount rate should reflect a company's ___ of ___.
 
cost; capital
   
A project with a positive net present value is ___ and a project with a negative net present value is ___.
 
acceptable; unacceptable
   
When the discount rate increases a project is more likely to be acceptable because its net present value will also increase.
 
False
   
Given a margin of 12%, sales of $150,000 and average operating assets of $90,000, the ROI is _____%
 
20
 
(150,000/90,000) x 12% = 20%
   
Choose the groups of performance measures typically used in the balanced scorecard approach.
 
Financial
Customer
Learning
Growth
   
State Bank is implementing a new marketing campaign that requires an initial investment of $35,000.
If the project profitability index is 1.2, the present value of the campaign's future cash flows is $___.
 
42,000
   
A tool to help managers make decisions about investments in major assets such as new facilities, equipment, and products is called _____ _____.
 
Capital; budgeting
   
How can a company increase its margin?
 
Reduce operating expenses
Increase sales
Increase selling price
   
Capital investment methods that ignore the time value of money are referred to as _____-_____ methods.
 
non discounting
   
Calderon Kitchen Supplies is planning to invest $210,000 in a new product. The product is expected to generate a net present value of $56,700. The project profitability index is ______.
 
1.27
   
Managers are required to evaluate and compare more than one capital investment alternative when making a(n) _____ decision.
 
preference
   
Capital budgeting decisions include ______.


a.) acquiring a new facility to increase capacity
b.) deciding to replace old equipment
c.) purchasing new equipment to reduce cost
d.) increasing the salary of the current company president
e.) determining which equipment to purchase among available alternatives
f.) choosing to lease or buy new equipment
g.) hiring new factory workers
   
Residual income is a measure used to evaluate managers of _____ centers.
 
investment
   
Horizons, Inc. had total assets of $220,000 in 2018 and $240,000 in 2019.
The percentage change in total assets was ______ (rounded).
 
9.1%
   
Using a balanced scorecard, top management can translate the company's vision and _____
into _____ measures that the employees can understand and influence.
 
Strategy; performance
   
In order to fully understand how a manager's decisions can affect ROI, both _____ and _____ should be computed.
 
margin; turnover
   
______ analysis is a technique that expresses each financial statement amount as a percentage of another
amount on the same financial statement.
Vertical
   
Calculating the proportion of each individual asset balance sheet to total assets is an example of ______ analysis.
 
Vertical
   
Ace Electric's income statement reports
 
Net Sales Revenue of $100,000
Cost of Goods Sold of $46,000;
Operating Expenses of $34,000
Interest Expense of $15,000
Income Tax Expense of $2,000
Net Income of $3,000.
 
If you were to perform a vertical analysis of this income statement,
you would divide each of these income statement line items by ______.
 
$100,000
   
Acme, Inc. had net income of $120,000 in 2018 and net income of $126,000 in 2019.
The percentage increase in net income was ______.
 
5%
   
Turnover incorporates a crucial area of a manger's responsibility which is:
 
investment in operating assets
   
When two projects are mutually exclusive, investing in one does not eliminate the other one from consideration.
 
False
   
Analyzing the percent change in Accounts Receivable from one period to the next is an example of ______ analysis.
 
Horizontal
   
What percentage of each dollar of sales affected net income given
 
Sales of $120,000
Cost of Goods Sold of $70,000
Operating Expenses of $10,000
Interest Expense of $5,000
Income Tax Expense of $5,000
Net Income of $30,000?
 
25%
   
To analyze changes in a company's net income over the last 10 years, you should perform a ______.
 
horizontal analysis

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