study accounting
quick ratio is
(Current Assets - Inventories) / Current Liabilities
Steps to maximize the value of non-financial measures, as suggest by Ittner and Larcker
1) base actions on findings 2)develop a casual model 3)assess outcomes 4) turn the data into information
Free cash flow formula
Cash from operations - Capital Expenditures - dividends
Contribution by profit
Controllable margin - non controllable fixed costs
EVA is calculated as
EVA net income - (cost of capital x EVA invested capital)
FCF multiple
Free cash flow x FCF multiple
Enterprise value
Market cap + Debt - Cash
Contribution margin
Net revenues - variable costs
If fairness only is considered, if a unit manager's unit is doing well, the unit manager prefers:
a unit-based pool over a firm-wide pool
The balanced scorecard measures the strategic business unit (SBU)'s performance in all of the following areas except:
accounting and tax compliance
in management compensation, the use of the balanced scorecard achieves
alignment of managers incentives of the organizations strategy
which of the following is one of the most comprehensive bases of compensation?
balanced scorecard
a bonus plan differs from a salary plan in terms of
base, pool and payment terms
Which of the following is not a step to maximize the value of nonfinancial measures, as suggested by Ittner and Larcker?
benchmark with similar firms
Which one of the following forms of compensation is a based upon the achievement of performance goals for a period?
bonus
the stock option form of bonus payments to managers usually
can lose some motivation because of the delay in reward
a current bonus can consist of
cash and/or stock
Which one of the following establishes an "arm's-length price" by using the sales prices of similar products made by unrelated firms?
comparable price method
Controllable margin
contribution margin - controllable fixed costs
A compensation plan with high salary, low bonus, and competitive benefits is in what phase of the product sales life-cycle?
decline
Reasons for failure to implement the balanced scorecard effectively include all of the following except:
failure to include SEC reporting responsibilities
The balanced scorecard is particularly important in difficult economic times because:
financial measures may be distorted
If an earnings multiplier is not available for a given firm, the multiplier used in an earnings-based method of valuation of a firm is often estimated from comparable:
firms
All of the following are possible transfer pricing methods used in practice except
fixed cost
What is an advantage of market price transfer pricing method?
helps to preserve division autonomy
To reduce the effect of risk aversion, management compensation plans should:
include a relatively large proportion of salary, with a smaller portion in bonus
the receivables turnover ratio is a measure of
liquidity
any system of compensation
may encourage unethical behavior
fringe benefits include all of the following except
performance shares
which of the following is a liquidity ratio
quick ratio
which compensation is generally paid currently
salary and benefits
Market cap
share price x shares outstanding
As a firm's strategy changes to respond to different stages of a product's life cycle, compensation:
should change in response to the new strategy
Firms typically provide benefits (perks) to employees to enhance motivation. Which of the following would not be an example of a perk?
stock options
which bonus compensation base might lack controllability
stock price
Companies use the balanced scorecard to describe strategy in detail through the use of a cause-and-effect diagram which is also known as a(n):
strategy map
Expropriation occurs when the government in which a foreign company's investment assets are located:
takes ownership and control of those assets
What is a common characteristic of Strategic business units (SBU) in practice?
they use little or no non-financial information
One of the most important international tax issues faced by multinational corporations is:
transfer pricing
