One Approach to Measuring the Short-Term Financial Performance of a Business

question 51

Multiple Choice

One approach to measuring the short-term financial performance of a business unit considered an investment center is return on investment (ROI) . ROI is expressed as operating income of the investment center:

• A) Divided by the current year's capital expenditures plus cost of capital.
• B) Minus imputed interest charged for the use of invested capital by the investment center.
• C) Divided by fixed assets.
• D) Divided by the assets used by the investment center.
• E) Minus the asset turnover (AT) of the investment center.

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Definitions:

Parent Company

A corporation that has control over one or more subsidiary companies, usually by owning a significant portion of their stock.

Fair Value

The predicted cost at which a property can be purchased or sold in a present deal between agreeable participants.

Equity Method

An accounting technique used to record investments in other companies, reflecting the owning company's proportionate share of the investee's profits.

Unrealized Gain Or Loss

Changes in the fair value of equity or debt securities for a period.