ACCT 2120 Chapter 11
EBIT
(NOI) earnings before interest and taxes
disadvantages of decentralization
-clashing objectives -lack of coordination -spreading of ideas may be difficult
How can a company increase its ROI
Increase selling prices reduce operating expenses increase unit sales
ROI=
NOI/Average Operating Assets
Operating assets include:
cash accounts receivable inventory plant and equipment all other assets held for operating purposes
An organization where decision making authority is spread throught the org. is....
decentralized
NOI is income before...
interest and taxes
ROI is a method used to evaluate
investment centers
residual income is used to evaluate managers of
investment centers
using net book value to calculate average operating assets is bad because...
it increases ROI overtime
in order to fully understand how a managers decisions can affect ROI they need to compute...
margin and turnover
Comparing actual net income to budgeted net income is often done to evaluate a manager in _____ center
profit
Comparing actual net income to budgeted net income is often done to evaluate the manager of a ____ center
profit
lower level managers decision making authority can be linked to the outcomes of those decisions through
responsibility accounting systems
The higher a business segment's ROI
the greater the profit earned per dollar
Managers of cost centers are evaluated according to
their ability to control costs in their responsibly center
