130) In an Economic Value Added calculation, the appropriate measure of a division's profit would be

that division's after tax operating profit.

130)

 

131) The 'four levers' of control are operating profit before taxes, return on investment, residual income,

and economic value added.

131)

 

132) Return on investment is also called the accrual accounting rate of return. 132)

 

58

133) Using gross book value as an investment base will result in a lower ROI than using net book value

as an investment base.

133)

 

134) Return on investment is also called the IMPUTED COST of the investment. 134)

 

investment.

135) Evaluating an executive's performance using the annual return on investment would sharpen an

executive's long-run focus.

135)

 

136) In an Economic Added Value calculation, the corporate charge for a division's investment is based

entirely on the after-tax interest rate on the firm's debt.

136)

 

investment is based on a weighted average of the after-tax interest rate on the firm's

debt and the cost of the firm's equity.

137) In an Economic Value Added calculation, the measure of the invested capital for a division would

be that division's assets minus that division's liabilities.

137)

 

138) Companies that adopt the Economic Value Added concept define investment as total assets

employed minus current liabilities.

138)

 

139) Using gross book value as an investment base is consistent with the amount of total assets shown in

the conventional balance sheet.

139)

 

 

 

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