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106.      The following information is available for the Hodge Podge Company:

               Sales     $250,000
               Invested capital     156,250
               ROI     10%
     
     The return on sales is:

     a.     10.00%
     b.     6.25%
     c.     62.50%
     d.     None of these answers is correct.


107.     


 

     a.     Return on sales
     b.     Capital turnover
     c.     Return on investment     
     d.     Residual income

108.     ROI is computed as:

     a.     income percentage of revenue x return on sales
     b.     capital turnover x return on sales
     c.     residual income x capital turnover
     d.     cost of capital x income percentage of revenue

109.     An improvement in either capital turnover or return on sales, without changing the other, will also improve the:

     a.     level of sales     
     b.     cost of capital
     c.     net book value
     d.     rate of return on invested capital

110.     


 

     a.     Return on sales
     b.     Residual income
     c.     Capital turnover     
     d.     Return on investment


111.      


 

     a.     A decrease in inventories
     b.     An increase in sales revenue
     c.     A decrease in expenses
     d.     All of these answers are correct.

112.      Residual income is defined as:

     a.     net income less "imputed" interest
     b.     sales less expenses
     c.     income divided by revenue
     d.     the same as ROI

113.     The following information pertains to Caravan Company:

               Total assets     $150,000
               Total current liabilities     110,000
               Total expenses     60,000
               Total liabilities     115,000
               Total revenues     80,000

     The income percentage of revenue is:

     a.     50%
     b.     25%
     c.     133%
     d.     75%

     
LEARNING OBJECTIVE 5

114.     The following information pertains to Saturn Company:
     
               Total assets     $50,000
               Total current liabilities     30,000
               Total expenses     60,000
               Total liabilities     45,000
               Total revenues     80,000

     If invested capital is defined as total assets, the capital turnover is:

     a.     0.633
     b.     1.792
     c.     0.400
     d.     1.600

     
115.      Invested capital can mean any of the following, except:

     a.     total assets
     b.     total assets less current liabilities
     c.     total assets less long term liabilities
     d.     total assets less total liabilities

116.     Identify which of the following definitions of invested capital is not recommended for measuring the performance of division managers.

     a.     total assets
     b.     total assets less total liabilities
     c.     total assets employed
     d.     total assets less current liabilities

117.      


 

     a.     Net book value
     b.     A net asset
     c.     Gross book value
     d.     Current cost

118.     The joint formulation by a manager and his or her superior of a set of goals and plans for achieving the goals for a forthcoming period is known as:

     a.     capital budgeting
     b.     managerial effort
     c.     management by opinion
     d.     management by objectives

119.     The following information pertains to Bundy Company:
     
               Total assets     $50,000
               Total current liabilities     30,000
               Total expenses     60,000
               Total liabilities     35,000
               Total revenues     80,000

     If invested capital is defined as total assets, the return on investment is:

     a.     160%
     b.     60%
     c.     70%
     d.     40%

     


120.     The following information pertains to Moore Company:
     
               Total assets     $50,000
               Total current liabilities     30,000
               Total expenses     60,000
               Total liabilities     35,000
               Total revenues     80,000

     If invested capital is defined as total assets, and the imputed interest rate is 8%, the residual income is:

     a.     $4,000
     b.     $16,000
     c.     $20,000
     d.     $1,600

     
121.     The following information pertains to Tyler Company:

               Total assets     $150,000
               Total current liabilities     110,000
               Total expenses     160,000
               Total liabilities     115,000
               Total revenues     180,000

     If invested capital is defined as total assets, a project earning an ROI of 12% should be:

     a.     accepted
     b.     rejected
     c.     rejected if the cost of capital is greater than 12%
     d.     rejected if the desired rate of return is less than 12%

122.     The following information pertains to Newhart Company:
     
               Total assets     $50,000
               Total current liabilities     10,000
               Total expenses     60,000
               Total liabilities     15,000
               Total revenues     80,000

     If invested capital is defined as total assets minus current liabilities, the residual income at an imputed interest rate of 10% is:

     a.     $16,000
     b.     $20,000
     c.     $4,000
     d.     $2,600

     

123.     The following information pertains to Milton Company:
     
               Total assets     $150,000
               Total current liabilities     110,000
               Total expenses     160,000
               Total liabilities     115,000
               Total revenues     180,000

     If invested capital is defined as total assets minus current liabilities, a project earning an ROI of 30% should be:

     a.     accepted
     b.     rejected
     c.     rejected if the cost of capital is less than 30%
     d.     rejected if the desired rate of return is greater than 30%

124.     The asset section of the January 1, 20X9, balance sheet of Big Valley Company includes a machine which was acquired on January 1, 20X5. The machine's original cost was $500,000, and the estimated life was determined to be 10 years. The estimated residual value was zero, and the straight-line method of depreciation was chosen. The book value of the machine as of January 1, 20X9, is:

     a.     $500,000
     b.     $450,000
     c.     $250,000
     d.     $300,000

     
125.     The asset section of the January 1, 20X9, balance sheet of Junction Company includes a machine which was acquired on January 1, 20X5. The machine's original cost was $500,000, and the estimated life was determined to be 10 years. The estimated residual value was zero, and the straight-line method of depreciation was chosen. If operating income before depreciation is $95,000, the rate of return on gross book value for 20X9 is:

     a.     9%
     b.     14.4%
     c.     18%
     d.     35%

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