When Using Variance Analysis for Performance Evaluation, Managers Often Focus

question 177

True/False

When using variance analysis for performance evaluation, managers often focus on effectiveness and efficiency as two of the common attributes used in comparing expected results with actual results.

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Definitions:

Financial Leverage

The action of using debt to magnify the expected return on an investment.

Operating Income

Income from a company's main business activities, excluding deductions for interest and taxes, showing the profitability from core operations.

ROE

Return On Equity, a measure of financial performance calculated by dividing net income by shareholders' equity, indicating how efficiently a company uses investments to generate earnings growth.

EPS

Earnings per share, a company's net profit divided by the number of its outstanding shares, indicating profitability.