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Review. Use the following to answer the following five questions Selected data from Chering Co.'s accounting records revealed the following: Sales $825,000 Average investment $440,000 Net income $ 66,000 Minimum rate of return 14%

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Review

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  1. Review Use the following to answer the following five questions Selected data from Chering Co.'s accounting records revealed the following: Sales $825,000 Average investment $440,000 Net income $ 66,000 Minimum rate of return 14% Chering Co.'s return on investment is calculated to be: A) 6.0%. B) 8.0%. C) 14.0%. D) 15.0%. E) 20.0%.

  2. Review Use the following to answer the following five questions Selected data from Chering Co.'s accounting records revealed the following: Sales $825,000 Average investment $440,000 Net income $ 66,000 Minimum rate of return 14% Chering Co.'s return on investment is calculated to be: A) 6.0%. B) 8.0%. C) 14.0%. D) 15.0%. ($66,000/$440,000) E) 20.0%.

  3. Review Chering Co.'s return on sales is calculated to be: A) 6.0%. B) 8.0%. C) 14.0%. D) 15.0%. E) 20.0%.

  4. Review Chering Co.'s return on sales is calculated to be: A) 6.0%. B) 8.0%. ($66,000/825,000) C) 14.0%. D) 15.0%. E) 20.0%.

  5. Review Chering Co.'s asset turnover is calculated to be: A) 1.07. B) 1.63. C) 1.88. D) 4.27. E) 12.50.

  6. Review Chering Co.'s asset turnover is calculated to be: A) 1.07. B) 1.63. C) 1.88.($825,000/$440,000) D) 4.27. E) 12.50.

  7. Review Chering Co.'s residual income is calculated to be: A) $ 4,400. B) $ 8,800. C) $ 9,240. D) $22,380. E) $49,500.

  8. Review Chering Co.'s residual income is calculated to be: A) $ 4,400. [$66.000 -(440,000 x .14)] B) $ 8,800. C) $ 9,240. D) $22,380. E) $49,500.

  9. Review If the minimum rate of return was 13%, Chering Co.'s residual income would calculate to be: A) $ 4,400. B) $ 8,800. C) $ 9,240. D) $22,380. E) $49,500.

  10. Review If the minimum rate of return was 13%, Chering Co.'s residual income would calculate to be: A) $ 4,400. B) $ 8,800. [$66,000 – ($440,000 x .13)] C) $ 9,240. D) $22,380. E) $49,500.

  11. Review Which of the following is NOT an example of a benefit? A) Free travel arrangements. B) A bonus based on achieving performance goals. C) Life insurance for family members. D) Tickets to entertainment events.

  12. Review Which of the following is NOT an example of a benefit? A) Free travel arrangements. B) A bonus based on achieving performance goals. C) Life insurance for family members. D) Tickets to entertainment events.

  13. Review Of the three basic forms of management compensation (salary, bonus, perks), the fastest growing part of the total compensation is: A) salary. B) bonus. C) perks. D) salary and bonus. E) They are all growing at the same rate.

  14. Review Of the three basic forms of management compensation (salary, bonus, perks), the fastest growing part of the total compensation is: A) salary. B) bonus. C) perks. D) salary and bonus. E) They are all growing at the same rate.

  15. Review The three most common bases of compensation are ________, strategic performance measures, or the balanced scorecard. A) Allocated costs. B) Sales. C) Stock price. D) Turnover ratio.

  16. Review The three most common bases of compensation are ________, strategic performance measures, or the balanced scorecard. A) Allocated costs. B) Sales. C) Stock price. D) Turnover ratio.

  17. Review Which of the following bonus payment options tends to be short-term focused? A) Current bonus B) Deferred bonus C) Stock options D) Performance shares

  18. Review Which of the following bonus payment options tends to be short-term focused? A) Current bonus B) Deferred bonus C) Stock options D) Performance shares

  19. Review The ideal compensation plan would make all company contributions to the plan immediately tax-deductible and all tax consequences for managers: A) non-existent. B) insignificant. C) deferred or avoidable. D) limited, but current. E) limited, but pre-paid.

  20. Review The ideal compensation plan would make all company contributions to the plan immediately tax-deductible and all tax consequences for managers: A) non-existent. B) insignificant. C) deferred or avoidable. D) limited, but current. E) limited, but pre-paid.

  21. Review Which of the following compensation plans is never taxed to the manager? A) Salary B) Stock options - nonqualified plan C) Stock options - qualified plan D) Certain retirement plans E) Other perks

  22. Review Which of the following compensation plans is never taxed to the manager? A) Salary B) Stock options - nonqualified plan C) Stock options - qualified plan D) Certain retirement plans E) Other perks

  23. Review "Market value" is an objective measure that clearly shows what: A) the firm's accountant determines as the firm's worth to be. B) investors think the firm is worth. C) stock analysts calculate as the firm's worth. D) is the sales value of the firm. E) is the liquidation value of the firm.

  24. Review "Market value" is an objective measure that clearly shows what: A) the firm's accountant determines as the firm's worth to be. B) investors think the firm is worth. C) stock analysts calculate as the firm's worth. D) is the sales value of the firm. E) is the liquidation value of the firm.

  25. Review Which of the following is NOT a key measure of liquidity? A) Current ratio. B) Cash flow ratio. C) Inventory turnover. D) Gross margin percent.

  26. Review Which of the following is NOT a key measure of liquidity? A) Current ratio. B) Cash flow ratio. C) Inventory turnover. D) Gross margin percent.

  27. Review Which of the following is NOT a method for valuing a firm? A) Balanced scorecard method B) Market value method C) Book value method D) The discounted cash flow method E) Multiples based method

  28. Review Which of the following is NOT a method for valuing a firm? A) Balanced scorecard method B) Market value method C) Book value method D) The discounted cash flow method E) Multiples based method

  29. Calculate EVA • Malone Corporation had net income of $192,000 in 2007. Its cost of capital was 12% and its invested capital was $1,000,000. Malone’s EVA for 2007 was A) $119,000 B) $120,000 C) $72,000 D) $24,000

  30. Calculate EVA • Malone Corporation had net income of $192,000 in 2007. Its cost of capital was 12% and its invested capital was $1,000,000. Malone’s EVA for 2007 was A) $192,000 B) $120,000 C) $72,000 [$192,000 – ($1,000,000 x .12)] D) $24,000

  31. Review _______________ is a long-term project that involves a large sum of funds and that provides expected future benefits. A) A balanced scorecard B) A master budget C) A capital budget D) A capital investment E) A multicriteria decision model

  32. Review _______________ is a long-term project that involves a large sum of funds and that provides expected future benefits. A) A balanced scorecard B) A master budget C) A capital budget D) A capital investment E) A multicriteria decision model

  33. Review Which of the following is NOT a contribution that the accountant makes to the capital budgeting process? A) Linkage to master budget (planning) B) Linkage to the balanced scorecard (control) C) Generation of relevant data for investment analysis purposes (decision making) D) Conducting of post-audits (control) E) All of the above are contributions made by the accountant.

  34. Review Which of the following is NOT a contribution that the accountant makes to the capital budgeting process? A) Linkage to master budget (planning) B) Linkage to the balanced scorecard (control) C) Generation of relevant data for investment analysis purposes (decision making) D) Conducting of post-audits (control) E) All of the above are contributions made by the accountant.

  35. Review _______________ is a multicriteria decision technique that can combine qualitative and quantitative factors in the overall evaluation of decision alternatives. A) The balanced scorecard B) The analytic hierarchy process C) A capital budget D) The capital asset pricing model E) None of the above.

  36. Review _______________ is a multicriteria decision technique that can combine qualitative and quantitative factors in the overall evaluation of decision alternatives. A) The balanced scorecard B) The analytic hierarchy process C) A capital budget D) The capital asset pricing model E) None of the above.

  37. Review What is the proper procedure for handling working capital commitments in a capital budgeting decision? A) Show it as a negative cash flow in the project initiation year. B) Show it as a positive cash flow in the project initiation year. C) Show it as a positive cash flow in the final project disposal year. D) Both a and c are correct. E) Both b and c are correct.

  38. Review What is the proper procedure for handling working capital commitments in a capital budgeting decision? A) Show it as a negative cash flow in the project initiation year. B) Show it as a positive cash flow in the project initiation year. C) Show it as a positive cash flow in the final project disposal year. D) Both a and c are correct. E) Both b and c are correct.

  39. Review Cash flows occur at three stages of the capital investment project, in the following sequence: A) project consideration, project implementation, project evaluation. B) project implementation, project consideration, project termination. C) project initiation, project operation, final disposal. D) project operation, project evaluation, final disposal. E) project reflection, project inception, project operation.

  40. Review Cash flows occur at three stages of the capital investment project, in the following sequence: A) project consideration, project implementation, project evaluation. B) project implementation, project consideration, project termination. C) project initiation, project operation, final disposal. D) project operation, project evaluation, final disposal. E) project reflection, project inception, project operation.

  41. Review USE THE FOLLOWING INFORMATION TO ANSWER the NEXT 3 QUESTIONS Brent Corporation is considering purchasing a machine for $2,000,000. The machine will generate a net after-tax income of $80,000 per year. The firm will use straight-line depreciation for the new machine over the machine's useful life of 10 years with no residual value. What is the new machine's net present value if the firm has a minimum rate of return of 10% on all investments? A) $140,000 B) $279,400 C) $1,139,700 D) $1,200,000 E) $1,508,400

  42. Review USE THE FOLLOWING INFORMATION TO ANSWER the NEXT 3 QUESTIONS Brent Corporation is considering purchasing a machine for $2,000,000. The machine will generate a net after-tax income of $80,000 per year. The firm will use straight-line depreciation for the new machine over the machine's useful life of 10 years with no residual value. What is the new machine's net present value if the firm has a minimum rate of return of 10% on all investments? A) $140,000 B) $279,400 C) $1,139,700 D) $1,200,000 E) $1,508,400 Initial investment ($2,000,000) x 1.000 = ($2,000,000) Cash flow = $80,000 + ($2,000,000 / 10) = $280,000 Present value factor 1-10 = 6.1425 $280,000 x 6.145= $1,720,600 NPV=($279,400) reject

  43. Review What is the payback period for the new machine? A) 7.14 years B) 8.33 years C) 9.16 years D) 10 years E) 14.29 years

  44. Review What is the payback period for the new machine? A) 7.14 years B) 8.33 years C) 9.16 years D) 10 years E) 14.29 years Payback period = $2,000,000 / $280,000 = 7.14 years

  45. Review What is the new machine's average book (accounting) rate of return? A) 6.35% B) 7.50% C) 8% D) 10% E) 12%

  46. Review What is the new machine's average book (accounting) rate of return? A) 6.35% B) 7.50% C) 8% D) 10% E) 12% Calculation – Avg. investment = $2,000,000/2 =$1,000,000 $80,000/$1,000,000 = 8%

  47. Review _______________ is the process of selectively varying a key input variable. A) Sensitivity analysis B) Scenario analysis C) Monte Carlo simulation D) The balanced scorecard

  48. Review _______________ is the process of selectively varying a key input variable. A) Sensitivity analysis B) Scenario analysis C) Monte Carlo simulation D) The balanced scorecard

  49. Review The capital budgeting method(s) that provide(s) consistency between data for budgeting and data for performance evaluation is (are) the: A) payback period. B) discounted cash flow methods. C) accounting rate of return D) All of the above are correct. E) Only a and b are correct.

  50. Review The capital budgeting method(s) that provide(s) consistency between data for budgeting and data for performance evaluation is (are) the: A) payback period. B) discounted cash flow methods. C) accounting rate of return D) All of the above are correct. E) Only a and b are correct.

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