Which of the Following Is NOT a Reason for Evaluating

question 4

Multiple Choice

Which of the following is NOT a reason for evaluating subunits over a multi-year time horizon?

• A)Benefits of actions taken in the current period may not show up in a short-term performance measure.
• B)Managers may curtail R & D or plant maintenance in order to increase short-term results.
• C)Investments may actually decrease ROI and or RI in the short-term.
• D)The NPV of the cash flows over the life of an investment equals [total assets ÷ ROI].
• E)Investments may actually decrease ROI and or RI in the short-term, and benefits of actions taken in the current period may not show up in a short-term performance measure.

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Definitions:

Information and Communication Technologies

An umbrella term that includes all technologies for the manipulation and communication of information.

Equity Method

An accounting technique used by companies to assess the profits earned by their investments in other companies by reporting these profits as income.

Retained Earnings

Cumulative net income of a company that has not been distributed to shareholders as dividends, reinvested in the business.

Non-Controlling Interest

The equity in a subsidiary not attributable, directly or indirectly, to a parent company.