When Assessing Performance,one Way to Compensate for Differences Among Divisions

question 62

Multiple Choice

When assessing performance,one way to compensate for differences among divisions of a multinational organization would be for the parent company to

• A)use different target rates of return to compute residual incomes.
• B)modify the return on investment calculation so that foreign currency fluctuations are removed from all financial statement figures.
• C)classify all domestic divisions as investment centers and all foreign divisions as profit centers.
• D)use financial performance measures for units whose records are kept in the domestic currency and non-financial measures for units whose records are kept in a foreign currency.

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Definitions:

Perfectly Competitive

A market structure characterized by many buyers and sellers, homogeneous products, free entry and exit, and perfect information.

Efficient

The optimal allocation and utilization of resources to achieve the best possible outcome or output.

Excess Capacity

Excess capacity occurs when a firm's actual production is less than its maximum possible output, often indicating underutilized resources or insufficient demand.

Perfect Competition

An economic model describing a market where no buyer or seller has the market power to influence prices, characterized by many participants and free entry and exit.