The Performance Evaluation of a Profit Center Is Typically Based

question 57

Multiple Choice

The performance evaluation of a profit center is typically based on its

• A)segment margin.
• B)static budget variance.
• C)return on investment.
• D)return on assets.

---

Definitions:

Interest Tax Shield

A deduction allowed for the interest paid on debt, thereby reducing taxable income and the total tax owed.

M&M Proposition I

outlines that in a perfect market, without taxes and transaction costs, a company's value is unaffected by its capital structure.

Direct Bankruptcy Costs

The expenses incurred by a company when going through the process of declaring bankruptcy, including legal fees, accounting fees, trustee fees, and other associated administrative expenses.

Pre-Packaged Bankruptcy

A plan for financial reorganization that a company prepares in cooperation with its creditors before filing for bankruptcy.