Economic Value Added (EVA®)

question 144

Multiple Choice

Economic value added (EVA®) :

• A) Encourages divisional managers to accept only new capital projects (i.e., long-term investments) with a return on investment (ROI) that exceeds the current ROI.
• B) Of $50,000 indicates that the division earned $50,000 for the company.
• C) Of $10,000 indicates that the division's actual earnings (adjusted for bias effects of accounting conservatism) exceed the division's imputed capital charge by $10,000.
• D) Is considered appropriate for evaluating the financial performance of profit but not investment centers.
• E) Has the added benefit of being usable for income tax determination purposes.

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Definitions:

Standard Deviation

A measure of the dispersion or variation in a set of values, indicating how much they deviate from the mean.

Historical Experience

Previous experiences or outcomes that are used as a guide or reference for making future decisions or predictions.

Labour Standards

Regulations and practices that aim to ensure fair treatment, safety, and well-being of workers in the workplace.

Allowances

Financial or other concessions granted to employees, customers, or other stakeholders, typically for specific purposes or as adjustments under certain conditions.