If a Division Is Evaluated Using Return on Investment (ROI)without

question 47

Multiple Choice

If a division is evaluated using return on investment (ROI) without regard to how assets are financed,the denominator in the ROI calculation will be:

• A)current assets.
• B)working capital.
• C)total assets available.
• D)total assets employeD.

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Definitions:

Sensitivity Analysis

A technique used to determine how different values of an independent variable impact a particular dependent variable under a given set of assumptions.

Variance Analysis

The process of examining differences between planned financial outcomes and actual financial performance.

Ratio Analysis

A quantitative analysis of information contained in a company's financial statements, used to evaluate performance, liquidity, profitability, and solvency.

Financial Statement Items

The individual line entries that make up financial statements such as the balance sheet, income statement, and statement of cash flows, detailing financial performance and position.