Question

33.      A shortcoming of return on investment (ROI) is that it may notlead managers to accept good investment opportunities if

a.	ROI of the investment is higher than the present ROI of the division.
b.	the ROI of the investment is the same as the present ROI of the division.
c.	the ROI of the investment is lower than the present ROI of the division.
d.	None of the answers is correct.

Framing Division

The Framing Division had the following data:

Year	Division Revenue	Profit Margin	Division Investment
2008	$1,500,000	$100,000	$  500,000
2009	2,500,000	350,000	1,500,000
2010	4,000,000	400,000	2,000,000

34.      Refer to the Framing Division. What is the investment turnover ratio for Year 2010?

a.	1.0
b.	1.5
c.	1.6
d.	2.0

35.      The following is a measure for assessing how effectively management used the funds invested and is the ratio of divisional sales to the investment in divisional assets.

a.	profit margin percentage.
b.	return on investment.
c.	investment turnover ratio.
d.	investment realization ratio.

36.      What is economic value added (EVA)?

a.	The same as the rate of return on liabilities.
b.	The same as the rate of return on total assets.
c.	The same as the rate of return on shareholders equity.
d.	The amount of earnings generated above the cost of funds invested to generate those earnings.

Answer 1

Answer 33
Option C is correct because at first glance, it will give the
picture that investment is not good as it is generating lower ROI
Answer 34
Invstmt. T/O ratio = Sales / Invstmt.
4000000 / 2000000
2
Option D is correct
Answer 35
Option C is correct
Invstmt. T/O ratio = Sales / Invstmt.
Answer 36
Option D is correct