To Adequately Evaluate an Investment Center's Financial Performance, Summary Performance

question 64

True/False

To adequately evaluate an investment center's financial performance, summary performance measures that include both the division's operating income and its assets are required.

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Definitions:

Initial Cash Outlay

The initial funds required for an investment or project, including costs such as acquisition, setup, and related expenses.

Operating Leverage

The degree to which a firm or project can increase operating income by increasing revenue, a measure of how sales growth translates to growth in operating income.

Forecasting Error

The difference between the actual outcome and the predicted value in a forecast.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating a company's fixed versus variable costs.