SpandoCorp Is a Diversified Firm That Makes Industrial, Military and Consumer

question 57

Multiple Choice

SpandoCorp is a diversified firm that makes industrial, military and consumer products from Spandex. SpandoCorp manages each of the businesses that it operates in as a separate division and treats each as a True profit-and-loss center. In this organization, Grace McKenna is responsible for deciding which set of businesses SpandoCorp will operate in and for encouraging behavior that is consistent with this strategy, Wells Tucker provides information to McKenna about the internal and external environments that she uses in her decision making, and Kelly Rae is one of the individuals who is responsible for evaluating the firm's decision making to ensure that it is consistent with the interests of equity holders.
-If SpandoCorp wanted to measure the performance of its divisions with a method that would minimize any potential short-term bias, it should use a(n)

• A) hurdle rate based measure of divisional performance.
• B) divisional budget based measure of performance.
• C) economic value added measure of divisional performance.
• D) measure of performance based on the average level of profitability of firms in a division's industry.

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Definitions:

Comparative Negligence

A legal doctrine that reduces the amount of damages a plaintiff can recover in a negligence-based claim, proportionate to their degree of fault in causing the harm.

Market Share

The portion of a market controlled by a particular company or product, often expressed as a percentage of total sales.

Negligence Theory

A legal concept that holds parties liable for harm caused by their failure to act as a reasonable person would under similar circumstances.

Properly Manufactured

A term indicating that a product has been made according to the required standards and specifications, ensuring its safety and quality.