True-False
Indicate whether each statement istrue (T) or false (F).
___ 1. A companyâsmarket share is an example of external nonfinancialinformation.
___ 2. A good reasonfor using ROI as a performance measure rather than RI is that goalcongruence is more likely to be promoted by using ROI.
___ 3. The DuPontmethod of profitability analysis recognizes two basic ingredientsto profit making: increasing income per dollar of revenues andusing assets to generate more revenues.
___ 4. If companiescompensate managers on the basis of changes in the market price ofthe companyâs stock, this approach tends to shorten managersâ timehorizon because stock prices incorporate the expected future periodeffects of current decisions.
___ 5. Those who favorusing net book value as the investment base in ROI calculationsclaim this approach enables more accurate comparisons to be madeacross subunits.
___ 6. Comparingperformance of the divisions of a multinational company isdifficult because of economic, legal, political, cultural, andcurrency differences.
___ 7. The necessaryand sufficient condition for moral hazard to exist in a company isthat the employeeâs interest differs from the ownerâs interest.
___ 8. Performancemeasures that are sensitive to the managerâs performance motivatethe manager but limit his or her exposure to uncontrollablerisk.
___ 9. It can be costeffective to benchmark a managerâs performance against the bestlevels of performance available within the company or in othercompanies.
___ 10. Holding managers and otheremployees accountable for and rewarding them for achievingperformance goals in diagnostic control systems needs to becounter-balanced with boundary systems, belief systems, andinteractive control systems.
True-False
Indicate whether each statement istrue (T) or false (F).
___ 1. A companyâsmarket share is an example of external nonfinancialinformation.
___ 2. A good reasonfor using ROI as a performance measure rather than RI is that goalcongruence is more likely to be promoted by using ROI.
___ 3. The DuPontmethod of profitability analysis recognizes two basic ingredientsto profit making: increasing income per dollar of revenues andusing assets to generate more revenues.
___ 4. If companiescompensate managers on the basis of changes in the market price ofthe companyâs stock, this approach tends to shorten managersâ timehorizon because stock prices incorporate the expected future periodeffects of current decisions.
___ 5. Those who favorusing net book value as the investment base in ROI calculationsclaim this approach enables more accurate comparisons to be madeacross subunits.
___ 6. Comparingperformance of the divisions of a multinational company isdifficult because of economic, legal, political, cultural, andcurrency differences.
___ 7. The necessaryand sufficient condition for moral hazard to exist in a company isthat the employeeâs interest differs from the ownerâs interest.
___ 8. Performancemeasures that are sensitive to the managerâs performance motivatethe manager but limit his or her exposure to uncontrollablerisk.
___ 9. It can be costeffective to benchmark a managerâs performance against the bestlevels of performance available within the company or in othercompanies.
___ 10. Holding managers and otheremployees accountable for and rewarding them for achievingperformance goals in diagnostic control systems needs to becounter-balanced with boundary systems, belief systems, andinteractive control systems.
