If Management Wishes to Evaluate the Ability of a Business

question 105

Multiple Choice

If management wishes to evaluate the ability of a business to provide funding to cover the operating expenses,they could use the:

• A)rate of return on total assets.
• B)rate of return on common stockholders' equity.
• C)gross profit rate.
• D)times interest earned.

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Definitions:

Performance Evaluation

The process of assessing and reviewing an employee's or organization's work performance and outcomes against established standards or objectives.

Labor Efficiency Variance

The difference between the actual labor-hours taken to complete a task and the standard hours allowed for the actual output, multiplied by the standard hourly labor rate.

Standard

A benchmark or guideline used to measure or set the quality, quantity, or value of products or processes.

Variable Overhead Efficiency Variance

The difference between the actual level of activity (direct labor-hours, machine-hours, or some other base) and the standard activity allowed, multiplied by the variable part of the predetermined overhead rate.