Enterprise Performance Management - MCQ

Enterprise Performance ManagementM.B.A. III Sem – (302)

Multiple Choice Questions

Q.1). Performance Management defineda) The activity where a line manager sets objectives for his/her staffb) To develop punitive steps to address poor performancec) To ensure all stakeholder requirements will be metd) To comply with the requirements of HR

Ans: c

Q.2). Performance management is believed to have originated from which country?a) Japanb) Francec) Denmarkd) USA

Ans: d

Q.3). Which of the following statements about performance management systems is not true?a) Performance management systems are ineffectiveb) They encourage a short-term view among managersc) Recommendations are prescriptive and suggest one best wayd) They improve organisational performance in the long-term

Ans: d

Q.4). The term 'EVA' is used for:a) Extra Value Analysis, b) Economic Value Added,c) Expected Value Analysis,d) Engineering Value Analysis.

Ans: b Q.5). DU PONT Analysis deals with:

a) Analysis of Current Assets, b) Analysis of Profit, c) Capital Budgeting, d) Analysis of Fixed Assets

Ans: b

Q.6). Return on Investment may be improved by one of these:a) Increasing Turnover,b) increasing Expenses,c) decreasing Capital Utilization,d) over budgeting

Ans: a

Q.7). Planning of Performance requires:a) Translating the job description into objectives and measuresb) Assessing your culturec) Setting aligned KPA’s and objectivesd) Defining a development plan for employees

Ans: c & d

Q.8). Maintaining performance includes:a) Checking up staff to ensure they perform optimallyb) Provide coaching and training where gaps existc) Formal feedbackd) Disciplining poor performance

Ans: b & d

Q.9). Key Value Drivers are:a) The assets of the companyb) The requirements and expectations of all key stakeholdersc) Formally reported in the annual reportd) The basis of strategy and operational focus areas

Ans: b & d

Q.10). Budgetary control involves all but one of the following:a) Modifying future plans.b) Analyzing differences.c) Using static budgets.d) Determining differences between actual and planned results.

Ans: c

Q.11). A static budget is useful in controlling costs when cost behavior is:a) Mixed.b) Fixed.c) Variable.d) Linear.

Ans: b

Q.12). Under responsibility accounting, the evaluation of a manager’s performance is based on matters that the manager:a) Directly controls.b) Directly and indirectly controls.c) Indirectly controls.d) Has shared responsibility for with another manager.

Ans: a

Q.13). Responsibility centers include:a) Adjustment centers.b) Call centers.c) Exam centers.d) Profit center.

Ans: d

Q.14). Responsibility reports for cost centers:a) Distinguish between fixed and variable costs.b) Use static budget data.c) Include both controllable and non-controllable costs.d) Include only controllable costs.

Ans: d

Q.15). In a responsibility report for a profit center, controllable fixed costs are deducted from contribution margin to show:a) Profit center margin.b) Controllable margin.c) Net income.d) Income from operations.

Ans: b

Q.16). In the formula for return on investment (ROI), the factors for controllable margin and operating assets are, respectively:a) Controllable margin percentage and total operating assets.b) Controllable margin dollars and average operating assets.c) Controllable margin dollars and total assets.d) Controllable margin percentage and average operating assets.

Ans: b

Q.17). A manager of an investment center can improve ROI by:a) Increasing average operating assets.b) Reducing sales.c) Increasing variable costs.

d) Reducing variable and/or controllable fixed costs.

Ans: d

Q.18). In the formula for residual income, the factors for computing residual income are:a) Contribution margin, controllable margin, and average operating assets.b) Controllable margin, average operating assets, and ROI.c) Controllable margin, average operating assets, and minimum rate of return.d) Controllable margin, ROI, and minimum rate of return.

Ans: c

Q.19). When managers of subunits throughout an organization strive to achieve the goals set by top management, the result is: a) Goal congruence. b) Planning and control. c) Responsibility accounting. d) Delegation of decision making.

Ans: a

Q.20). Which of the following is not an example of a responsibility center? a) Revenue center. b) Profit center. c) Investment center. d) Contribution center.

Ans: d

Q.21). Which of the following would have a low likelihood of being organized as a profit center? a) A maintenance department that charges users for its services. b) The billing department of an Internet Services Provider (ISP). c) The mayor's office in a large city. d) Both "C" and "D" above.

Ans: d

Q.22). A cost center manager: a) Does not have the ability to produce revenue. b) May be involved with the sale of new marketing programs to clients. c) Would normally be held accountable for producing an adequate return on invested

capital. d) Often oversees divisional operations.

Ans: a

Q.23). A responsibility center in which the manager is held accountable for the profitable use of assets and capital is commonly known as a(n):

a) Cost center. b) Revenue center. c) Profit center. d) Investment center.

Ans: d

Q.24). Performance reports help managers: a) Use management by exception and effectively control operations. b) Design their organizational hierarchy. c) Pinpoint trouble spots. d) By assisting with functions "A" and "D."

Ans: d

Q.25). Performance reports provide feedback to managers and allow them to better control operations.

II. Many performance reports have budget, actual, and variance data.III. Performance reports are often structured around a firm's organizational hierarchy—that is, data relating to lower-level units (e.g., departments) are combined and flow into higher-level units (e.g., stores).Which of the above statements is (are) true?

a) I only. b) I and II. c) I and III. d) I, II, and III.

Ans: d

Q.26). Responsibility accounting systems strive to: a) Place blame on guilty individuals. b) Provide information to managers. c) Hold managers accountable for both controllable and non-controllable costs. d) Provide information so that managers can make decisions that are in the best interest of

their individual centers rather than in the best interests of the firm as a whole.

Ans: b

Q.27). Controllable costs, as used in a responsibility accounting system, consist of: a) Only fixed costs. b) Only direct materials and direct labor. c) Those costs that a manager can influence in the time period under review. d) Those costs about which a manager has some knowledge. Those costs that are

influenced by parties external to the organization.

Ans: c

Q.28). For a company that uses responsibility accounting, which of the following costs is least likely to appear on a performance report of an assembly-line supervisor? a) Direct materials used. b) Departmental supplies. c) Assembly-line labor. d) Assembly-line facilities depreciation.

Ans: d

Q.29). Which one is the Capital Expenditure?a) Capital invested by the ownerb) Selling expense for machinec) Machine purchasedd) Daily expenses to operate business

Ans: c

Q.30). If capital expense is recorded as revenue expense then which calculation will be wrong?a) Bank balanceb) Debtorsc) Creditorsd) Net profit

Ans: d

Q.31). Capital expenditure i) Car purchased for sale

ii) Machine purchased for business useiii) Road tax and insurance premium of delivery van

Which one is correct of the following?

a) i & iib) ii & iiic) i & iiid) i, ii & iii

Ans: b

Q.32). Sale of machine of machine merchandising business –a) Capital receiptb) Capital incomec) Revenue incomed) Revenue receipt

Ans: d

Q.33). In comprehensive income statement we record -i) Revenue receipt

ii) Revenue incomeiii) Capital expenditure

Which one is correct of the following?

a) i & iib) ii & iiic) i & iiid) ii

Ans: b 

Q.34). A Balanced Scorecard helps the organisation to:

a) Be ready and prepared to implement an ERPb) Be focus on all the relevant business perspectivesc) Integrate strategy and key challengesd) Communicate better with staff

Ans: b c & d

Q.35). What do we call a formal comparison of the actual costs and benefits of a project with original estimates?

a) Post-completion auditb) Feedback auditc) Cost-benefit analysisd) Business scorecard report

Ans: a

Q.36). What is the term used to describe the value assigned to the goods or services sold or rented from one unit of an organization to another

a) Variable costb) Fixed costc) Transfer priced) Full service cost

Ans: c

Q.37). What should be added to the opportunity cost of the resource at the point of transfer to obtain the general principle transfer price that leads managers to make decisions in a firm's best interest?

a) Sunk costb) Variable costc) Outlay costd) Transfer cost

Ans: c

Q.38). If an intermediate market exists, the general rule is that the optimal transfer price should be the:

a) Outlay cost for producing the goodsb) Opportunity cost of not selling to the outside marketc) Market priced) Variable costs associated with producing the product

Ans: c

Q.39). Which transfer pricing method will preserve the subunit autonomy?

a) Variable-cost pricingb) Negotiated pricingc) Cost-based pricingd) Full-cost pricing

Ans: b

Q.40). When a perfectly competitive market exists and the firm uses market-based transfer pricing, the firm can achieve all of the following except for:

a) Management effortb) Subunit performance evaluationc) Price monopolyd) Goal congruence

Ans: c

Q.41). The method of calculating return on assets which highlights the importance of sales, profit margin and asset turnover is known as

a) The sales method b) Du-pont analysis c) The altman model d) The gordon model

Ans: b

Q.42). Asset utilization ratios measure all of the following except

a) Productivity of fixed assets in terms of sales b) The relationship of the income statement to cash of the asset groups on the balance c) Sheet. d) How many times per year the inventory is sold and accounts receivable collected.

Ans: d

Q.43). Financial ratios are used to weigh and evaluate:

a) The operating performance and capital structure of the firm. b) Which stocks are the "gold mine" stocks when investing in the market? c) Which stocks are about to file for bankruptcy. d) The net present value of the company.

Ans: a

Q.44). _______________ is a measure of operating performance that indicates how successful the firm has been at increasing its MVA in a given year.

a) Economic value added (EVA)b) After-tax cash flow (ATCF)c) Earnings after taxes (EAT)d) Market value added (MVA)

Ans: a

Q.45). What is not included in a firm’s expenses?

a) Costs of goods soldb) Depreciationc) Interest expensed) Dividends

Ans: d

Q.46). ROI can be viewed as a function of the net profit margin times

a) Sales.b) EAT.c) The total asset turnover.d) Equity multiplier.

Ans: c

Q.47). If a significant portion of the assets of a firm has a market value ________ book value, the quality of the firm’s balance sheet is reduced.

a) Equal tob) Substantially belowc) Substantially aboved) None of the above

Ans: b

Q.48). Which of the following is not a profitability ratio?

a) Profitability ratiob) Net profit margin ratioc) Times interest earned ratiod) return on investment ratio

Ans: c

Q.49). Which of the following variable does ROI examine?

a) Eatb) Salesc) Total assetsd) All of the above

Ans: d

Q.50). The ________ compares the dollar return generated by the firm to the return expected by the investors of the capital invested by them in the firm.

a) EBITb) EVAc) ROId) DuPont chart

Ans: b

Q.51). Return on Assets and Return on Investment Ratios belong to:

a) Liquidity Ratiosb) Profitability Ratios,c) Solvency Ratios,d) Turnover

Ans: b

Q.52). Capital Budgeting is a part of:

a) Investment Decision,b) Working Capital Managementc) Marketing Management,d) Capital Structure.

Ans: a

Q.53). Capital Budgeting deals with:

a) Long-term Decisions,b) Short-term Decisions,c) Both (a) and (b),d) Neither e) nor (b).

Ans: a

Q.54). Which of the following is not used in Capital Budgeting?

a) Time Value of Money, b) Sensitivity Analysis, c) Net Assets Method,d) Cash Flows.

Ans: c

Q.55). Capital Budgeting Decisions are:

a) Reversible,b) Irreversible,c) Unimportant,d) All of the above.

Ans: b

Q.56). Which of the following is not incorporated in Capital Budgeting?

a) Tax-Effect,b) Time Value of Money,c) Required Rate of Return,d) Rate of Cash Discount.

Ans: d

Q.57). Which of the following is not a capital budgeting decision?

a) Expansion Programme,b) Merger, c) Replacement of an Asset,d) Inventory Level.

Ans: d

Q.58). A sound Capital Budgeting technique is based on:

a) Cash Flows,b) Accounting Profit,c) Interest Rate on Borrowings,d) Last Dividend Paid.

Ans: a

Q.59). Which of the following is not a relevant cost in Capital Budgeting?

a) Sunk Cost,b) Opportunity Cost,c) Allocated Overheads,d) Both (a) and (c) above.

Ans: d

Q.60). Capital Budgeting Decisions are based on:

a) Incremental Profit,b) Incremental Cash Flows,c) Incremental Assets,d) Incremental Capital.

Ans: b

Q.61). Which of the following does not affect cash flows proposal?

a) Salvage Value,b) Depreciation Amount,c) Tax Rate Change,d) Method of Project Financing.

Ans: d

Q.62). Cash Inflows from a project include:

a) Tax Shield of Depreciation,b) After-tax Operating Profits,c) Raising of Funds,d) Both (a) and (b).

Ans: c

Q.63). Which measure of performance is arguably most useful to shareholders

a) Economic value addedb) Wealth added indexc) Return on investmentd) Discounted cash flow

Ans: b

Q.64). The balanced scorecard approach is a framework for measuring performance based on four factors. These are 'innovation and learning', 'the customer perspective', 'the internal perspective' and:

a) The key shareholder perspectiveb) The external perspectivec) The financial perspectived) The helicopter perspective

Ans: c

Q.65). The Balanced Scorecard approach has been criticized for leaving out certain measures. One of these is:

a) Financial measuresb) Employee satisfaction measuresc) Customer satisfaction measuresd) Technological innovation measures

Ans: b

Q.66). How many measures do Kaplan and Norton recommend an organization should include when using the balanced scorecard approach?

a) 10-20b) 20-30c) 50-100d) 80-120

Ans: b

Q.67). In the balanced scorecard approach quality would come under which perspective?

a) The internal perspectiveb) The customer perspectivec) The financial perspectived) The innovation and learning perspective

Ans: a

Q.68). The U.S. National Quality Award is named after

a) Joseph Juranb) Genichi Taguchic) W. Edwards Demingd) Malcolm Baldrige

Ans: d

Q.69). The overall purpose of the balanced scorecard approach is to:

a) Help turn strategy into actionb) Benchmark against competitorsc) Measure financial performanced) Measure product quality

Ans: a

Q.70). The problem with using financial measures alone to measure organizational performance is that:

a) They need to be compared with competitors to have any real meaningb) They are only understood by accountantsc) There are many different measures availabled) The measures are usually contradictory

Ans: a

Q.71). Which of the following is not true with reference capital budgeting?

a) Capital budgeting is related to asset replacement decisions,b) Cost of capital is equal to minimum required return,c) Existing investment in a project is not treated as sunk cost,d) Timing of cash flows is relevant.

Ans: c

Q.72). Which of the following is not followed in capital budgeting?

a) Cash flows Principle,b) Interest Exclusion Principle,c) Accrual Principle,d) Post-tax Principle.

Ans: c

Q.73). Which of the following is not true for capital budgeting?

a) Sunk costs are ignored, b) Opportunity costs are excluded, c) Incremental cash flows are considered, d) Relevant cash flows are considered.

Ans: b

Q.74). Which of the following is not applied in capital budgeting?

a) Cash flows be calculated in incremental terms,b) All costs and benefits are measured on cash basis, c) All accrued costs and revenues be incorporated, d) All benefits are measured on after-tax basis.

Ans: c

Q.75). Evaluation of Capital Budgeting Proposals is based on Cash Flows because:

a) Cash Flows are easy to calculate, b) Cash Flows are suggested by SEBI, c) Cash is more important than profit,d) None of the above.

Ans: c

Q.76). Which of the following is not included in incremental A flows?

a) Opportunity Costs, b) Sunk Costs,c) Change in Working Capital,d) Inflation effect.

Ans: b

Q.77). A proposal is not a Capital Budgeting proposal if it:

a) Is related to Fixed Assets,

b) Brings long-term benefits,c) Brings short-term benefits only,d) Has very large investment.

Ans: c

Q.78). In Capital Budgeting, Sunk cost is excluded because it is:

a) Of Small Amount,b) Not Incremental,c) Not Reversible,d) All of the Above.

Ans: b

Q.79). Savings in respect of a cost is treated in capital budgeting as:

a) An Inflow,b) An Outflow,c) Nil, d) None of the above.

Ans: a

Q.80). According to DuPont analysis, an increase in the profit margin (all else constant) should:

a) Increase both ROE and ROA.b) Increase ROE but not ROA.c) Increase ROA but not ROE.d) Increase neither ROA nor ROE.

Ans: a

Q.81). According to DuPont analysis, an increase in asset turnover (all else constant) should:

a) Increase both ROE and ROA.b) Increase ROE but not ROA.c) Increase ROA but not ROE.d) Increase neither ROA nor ROE.

Ans: a

Q.82). According to DuPont analysis, an increase in the equity multiplier (all else constant) should:

a) Increase both ROE and ROA.

b) Increase ROE but not ROA.c) Increase ROA but not ROE.d) Increase neither ROA nor ROE.

Ans: b

Q.83). The Complete Balanced Scorecard Strategy Map lists perspectives along with sub items. Identify the correct link for Financial Perspective

a) Customer solutionsb) Operations Themec) Strategic Competenciesd) Productivity Strategy

Ans: d

Q.84). Identify the correct link for Customer Perspective in The Complete Balanced Scorecard Strategy Map

a) Product Leaderb) Innovation Themec) Revenue Growth Strategyd) Organization Alignment

Ans: a

Q.85). Internal Perspective is part of the Complete Balanced Scorecard Strategy. This is a correct sub item for this perspectivea) Regulatory and Society Themeb) Customer solutionsc) Strategic Technologiesd) Revenue Growth Strategy

Ans: a

Q.86). Learning & Growth Perspective: role for intangible assets -- people, systems, climate and culture is part of the BSC Strategy. Identify which of the following is a sub item of Learning & Growth Perspectivea) Improve shareholder valueb) Low total costc) Operations themed) Strategic technologies

Ans: d

Q.87). Nonprofit and government organizations (NPGOs)

a) Are unable to use the BSC effectively

b) Do not measure success by financial measuresc) Success has to be measured by their effectiveness in providing benefits to constituentsd) BSC is not the natural performance management system for NPGOs

Ans: c

Q.88). The process of evaluating an employee’s current and/or past performance relative to his or her performance standards is called _____.

a) recruitmentb) employee selectionc) performance appraisald) organizational development

Ans: c

Q.89). Pitfalls exists the same as with any new technology or management tool. All of the following describe these pitfalls except

e) Some companies use too few measures in their scoref) Some companies include too many measuresg) A poor scorecard is the biggest threat and one of the dangerous pitfallsh) Some companies do not know how to implement the effective drivers of performance

Ans: c

Q.90). Which of the following statements regarding flaws suffered by financial measures is not correct:a) They are hard to quantifyb) They do little to motivate employees to improve accounting profitsc) They are not effective in getting managers' attentiond) They are useful in identifying operational problems

Ans: d

Q.91). If return on investment is a measure used on the balanced scorecard, under which perspective would it be listeda) Financial perspectiveb) Customer perspectivec) Learning and growth perspectived) Internal business perspective

Ans: a

Q.92). Which one of the following is not one of the Balanced Scorecard’s four generic perspectives

a) Internal business processes

b) Innovation and learningc) Financiald) Marketing and advertising

Ans: d

Q.93). Which one of the following is a ‘lag’ performance indicator

a) Number of training hours per employeeb) Return on capital employedc) Number of complaints received from customersd) Output per employee

Ans: b

Q.94). Which one of the following statements is true

a) Balanced Scorecards can only be updated on an annual basisb) Balanced Scorecards always have four perspectivesc) Balanced Scorecards can be used in Not-for-Profit organisationsd) Balanced Scorecards are a feedback mechanism

Ans: c

Q.95). Which of the following statements is false? Balanced scorecards

a) Are one type of performance dashboardb) Can be cascaded to different levels/parts of organisationsc) Cannot be used in conjunction with budgetary control systemsd) Can be used to produce strategy maps

Ans: c

Q.96). Which of the following statements is correct:

a) One fundamental idea of balanced scorecards is to increase the number of performance indicators used to manage the business

b) Balanced scorecards always report using the same time periods as the financial accounting system

c) The fundamental idea of balanced scorecards is to create corporate strategyd) Organisations sometimes use a ‘traffic-light’ system on their balanced scorecard to help

them prioritise their activities

Ans: d

Q.97). The following are basic elements in which Continuous Improvement framework (leadership; planning; service orientation; information and analysis; employees and workplace climate; process management; excellence levels and trends

a) Six Sigmab) Total Quality Management (TQM)c) Zero Defectd) Malcolm Baldridge Quality Award

Ans: d

Q.98). The drive in world markets to produce superior goods has led some countries to recognize or award prizes. What is the name of U.S. prize for developing quality products:

a) the Deming Prizeb) Malcolm Baldridge National Quality Awardc) the J.D. Power Awardd) the K.C. Irving Quality Award

Ans: b

Q.99). When goal setting, performance appraisal, and development are consolidated into a single, common system designed to ensure that employee performance supports a company’s strategy, it is called _____.

a) Strategic organizational developmentb) Performance managementc) Performance appraisald) Human resource management

Ans: b 

Q.100). Performance management combines performance appraisal with _____ to ensure that employee performance is supportive of corporate goals.

a) Goal settingb) Absenteeism c) Incentive systems & Goal settingd) Strategic management

Ans: c