Question

Which of the following statements is correct?

A. Agency costs can be minimized by separating decision management from decision control.

B. Specific internal accounting procedures, such as standard costs, aid in decision management.

C. For decision management, most managers prefer accounting numbers.

D. Departments and companies with lower stock turns are using their capital more efficiently by limiting the number of times inventory is replaced during the period.

E. All of the choices are correct.

Economic value added (EVA):

A. uses the same basic formula as return on investment (ROI)

B. ignores R&D spending

C. decreases a manager’s incentive to maximize firm value

D. is easy to administer

E. measures the total return after deducting the cost of all capital employed by the firm

Answer 1

Answer-1. Correct option is 'D'

''Departments and companies with lower stock turns are using their capital more efficiently by limiting the number of times inventory is replaced during the period'', this statement is Correct. Working capital turnover is a ratio that measures how efficiently a company is using its working capital to support a given level of sales.

Answer-2. Correct option is 'E'

Economic value added (EVA) measures the total return after deducting the cost of all capital employed by the firm. Economic value added (EVA) is a measure of a company's financial performance based on the residual wealth calculated by deducting its cost of capital from its operating profit, adjusted for taxes on a cash basis.