The Following Are Disadvantages of Using EVA as a Performance

question 67

Multiple Choice

The following are disadvantages of using EVA as a performance measure EXCEPT:

• A)EVA does not measure present values.
• B)EVA rewards the choice of projects with quick paybacks and penalizes projects with longer payback periods.
• C)EVA reduces explicit monitoring by top management.
• D)EVA is difficult to apply to start-up ventures.

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Definitions:

Inventory Turnover Ratio

A measure of how quickly a company sells its inventory, indicating the efficiency of inventory management.

Receivable Turnover Ratio

A financial metric that measures how efficiently a company collects cash from its credit sales by calculating the number of times average receivables are collected during a period.

Average Days

Average days, often related to accounts receivable and payable, refers to the average number of days it takes a company to collect payments from customers or the time it takes to pay suppliers.