question archive 1) Which of the following is an expanded form of calculating return on investment? A
1) Which of the following is an expanded form of calculating return on investment? A
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1) Which of the following is an expanded form of calculating return on investment?
A. Profit margin ratio x Asset turnover ratio
B. Net profit ratio x Inventory turnover ratio
c. Gross profit ratio ~ EVA
D. Asset turnover ratio * Inventory turnover ratio
2) Which of the following can increase a company's return on investment?
A. decrease in operating income
B. decrease in residual income
C. decrease in asset turnover ratio
D. decrease in total assets
3) Regarding controllable costs, which of the following statements is incorrect?
A. The production manager cannot make the decision to replace older equipment
B. The production manager is not responsible for avoiding waste of direct materials.
C. All costs are ultimately controllable at the upper levels of management.
D. The production manager cannot control all of the costs in his or her department.
4) Which of the following best describes a capital budgeting post-audit?
A) an audit of an operating unit of a company
B) an audit performed only at the end of the project's life span
C) an analysis of an investment's cash flows prior to committing to the initial investment
D) a comparison of actual results of capital investments with projected results
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Answer:
1.
The extended formula for ROI is Profit Margin Ratio * Asset turnover ratio
As Return On Assets is also a type of Return on Investment.
Where Return on Assets (ROA) = Profit Margin Ratio * Asset Turover ratio.
2.
Answer : D = Decrease in Total Assets.
>> Return on Investment = ( Net Operating Income / Average Total Asset )
>> Total Asset is inversely proportion to Return on investment, so decrease in total assets will result in increase in return on investment.
>> Operating income is directly proportion to return on investment, So decrease in operating income wil result in decrease in return on investment
>> Residual income and asset turnover ratio are not directly effect return on investment
3.
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Answer) option B The production manager is not responsible for avoiding waste of direct materials Thus the other statements are correct except option B |
4.
D) a Comparison of actual results of capital investments with projected results
In the post-audit process, an analyst examines a company's capital-budgeting decisions to see how the actual results from the projects compare to the results the company estimated. The post-audit process gives the company a sense of not only how the projects are performing, but also how good its inputs were.
