What Is True of Companies That Use Relative Performance Evaluation

question 16

Multiple Choice

What is true of companies that use relative performance evaluation?

• A)Divisional performance is compared with that of other divisions in the same industry.
• B)Managers are not shielded from the risk of managing a division in a poorly performing industry.
• C)Incentives are not provided for managers to move out of low-performing to high-performing industries.
• D)All of the answers are correct.

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Definitions:

Realized Compound Yield

The reflective measurement of the total returns on an investment, factoring in compounding interest or returns over a specified time frame.

Coupon Rate

The yearly rate of interest that the entity issuing a bond pays to the bondholders, represented as a percentage of the bond's principal value.

Yield To Maturity

The expected rate of return on a bond if held until its maturity date, reflecting both interest payments and any gain or loss if the bond was purchased at a discount or premium.

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuer's equity shares at certain times during the bond's life, usually at the discretion of the bondholder.