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Enterprise Performance Management

M.B.A. III Sem (302)


Multiple Choice Questions
Q.1).
a)
b)
c)
d)

Performance Management defined


The activity where a line manager sets objectives for his/her staff
To develop punitive steps to address poor performance
To ensure all stakeholder requirements will be met
To comply with the requirements of HR

Ans: c
Q.2).
a)
b)
c)
d)

Performance management is believed to have originated from which country?


Japan
France
Denmark
USA

Ans: d
Q.3). Which of the following statements about performance management systems
is not true?
a) Performance management systems are ineffective
b) They encourage a short-term view among managers
c) Recommendations are prescriptive and suggest one best way
d) They improve organisational performance in the long-term
Ans: d
Q.4).
a)
b)
c)
d)

The term 'EVA' is used for:


Extra Value Analysis,
Economic Value Added,
Expected Value Analysis,
Engineering Value Analysis.

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

Analysis of Current Assets,


Analysis of Profit,
Capital Budgeting,
Analysis of Fixed Assets

Q.6).
a)
b)
c)
d)

Return on Investment may be improved by one of these:


Increasing Turnover,
increasing Expenses,
decreasing Capital Utilization,
over budgeting

Ans: a
Q.7).
a)
b)
c)
d)

Planning of Performance requires:


Translating the job description into objectives and measures
Assessing your culture
Setting aligned KPAs and objectives
Defining a development plan for employees

Ans: c & d
Q.8). Maintaining performance includes:
a) Checking up staff to ensure they perform optimally
b) Provide coaching and training where gaps exist
c) Formal feedback
d) Disciplining poor performance
Ans: b & d
Q.9).
a)
b)
c)
d)

Key Value Drivers are:


The assets of the company
The requirements and expectations of all key stakeholders
Formally reported in the annual report
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)
b)
c)
d)
Ans: b

A static budget is useful in controlling costs when cost behavior is:


Mixed.
Fixed.
Variable.
Linear.

Q.12). Under responsibility accounting, the evaluation of a managers 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).
a)
b)
c)
d)

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

Which one is the Capital Expenditure?


Capital invested by the owner
Selling expense for machine
Machine purchased
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 balance
b) Debtors
c) Creditors
d) Net profit
Ans: d
Q.31).
i)
ii)
iii)

Capital expenditure
Car purchased for sale
Machine purchased for business use
Road tax and insurance premium of delivery van

Which one is correct of the following?


a)
b)
c)
d)

i & ii
ii & iii
i & iii
i, ii & iii

Ans: b
Q.32). Sale of machine of machine merchandising business
a) Capital receipt
b) Capital income
c) Revenue income
d) Revenue receipt
Ans: d

Q.33).
i)
ii)
iii)

In comprehensive income statement we record Revenue receipt


Revenue income
Capital expenditure

Which one is correct of the following?


a)
b)
c)
d)

i & ii
ii & iii
i & iii
ii

Ans: b
Q.34). A Balanced Scorecard helps the organisation to:
a)
b)
c)
d)

Be ready and prepared to implement an ERP


Be focus on all the relevant business perspectives
Integrate strategy and key challenges
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)
b)
c)
d)

Post-completion audit
Feedback audit
Cost-benefit analysis
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)
b)
c)
d)

Variable cost
Fixed cost
Transfer price
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)
b)
c)
d)

Sunk cost
Variable cost
Outlay cost
Transfer cost

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

Outlay cost for producing the goods


Opportunity cost of not selling to the outside market
Market price
Variable costs associated with producing the product

Ans: c
Q.39). Which transfer pricing method will preserve the subunit autonomy?
a)
b)
c)
d)

Variable-cost pricing
Negotiated pricing
Cost-based pricing
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)
b)
c)
d)

Management effort
Subunit performance evaluation
Price monopoly
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)
b)
c)
d)

The sales method


Du-pont analysis
The altman model
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)
b)
c)
d)

The operating performance and capital structure of the firm.


Which stocks are the "gold mine" stocks when investing in the market?
Which stocks are about to file for bankruptcy.
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)
b)
c)
d)

Economic value added (EVA)


After-tax cash flow (ATCF)
Earnings after taxes (EAT)
Market value added (MVA)

Ans: a
Q.45). What is not included in a firms expenses?
a)
b)
c)
d)

Costs of goods sold


Depreciation
Interest expense
Dividends

Ans: d
Q.46). ROI can be viewed as a function of the net profit margin times
a)
b)
c)
d)

Sales.
EAT.
The total asset turnover.
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 firms balance sheet is reduced.
a)
b)
c)
d)
Ans: b

Equal to
Substantially below
Substantially above
None of the above

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


a)
b)
c)
d)

Profitability ratio
Net profit margin ratio
Times interest earned ratio
return on investment ratio

Ans: c
Q.49). Which of the following variable does ROI examine?
a)
b)
c)
d)

Eat
Sales
Total assets
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)
b)
c)
d)

EBIT
EVA
ROI
DuPont chart

Ans: b
Q.51). Return on Assets and Return on Investment Ratios belong to:
a)
b)
c)
d)

Liquidity Ratios
Profitability Ratios,
Solvency Ratios,
Turnover

Ans: b

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


a)
b)
c)
d)

Investment Decision,
Working Capital Management
Marketing Management,
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)
b)
c)
d)

Time Value of Money,


Sensitivity Analysis,
Net Assets Method,
Cash Flows.

Ans: c
Q.55). Capital Budgeting Decisions are:
a)
b)
c)
d)

Reversible,
Irreversible,
Unimportant,
All of the above.

Ans: b
Q.56). Which of the following is not incorporated in Capital Budgeting?
a)
b)
c)
d)

Tax-Effect,
Time Value of Money,
Required Rate of Return,
Rate of Cash Discount.

Ans: d

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


a)
b)
c)
d)

Expansion Programme,
Merger,
Replacement of an Asset,
Inventory Level.

Ans: d
Q.58). A sound Capital Budgeting technique is based on:
a)
b)
c)
d)

Cash Flows,
Accounting Profit,
Interest Rate on Borrowings,
Last Dividend Paid.

Ans: a
Q.59). Which of the following is not a relevant cost in Capital Budgeting?
a)
b)
c)
d)

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

Ans: d
Q.60). Capital Budgeting Decisions are based on:
a)
b)
c)
d)

Incremental Profit,
Incremental Cash Flows,
Incremental Assets,
Incremental Capital.

Ans: b
Q.61). Which of the following does not affect cash flows proposal?
a)
b)
c)
d)

Salvage Value,
Depreciation Amount,
Tax Rate Change,
Method of Project Financing.

Ans: d

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


a)
b)
c)
d)

Tax Shield of Depreciation,


After-tax Operating Profits,
Raising of Funds,
Both (a) and (b).

Ans: c
Q.63). Which measure of performance is arguably most useful to shareholders
a)
b)
c)
d)
Ans: b

Economic value added


Wealth added index
Return on investment
Discounted cash flow

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)
b)
c)
d)

The key shareholder perspective


The external perspective
The financial perspective
The helicopter perspective

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

Financial measures
Employee satisfaction measures
Customer satisfaction measures
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)
b)
c)
d)

10-20
20-30
50-100
80-120

Ans: b
Q.67). In the balanced scorecard approach quality would come under which perspective?
a)
b)
c)
d)

The internal perspective


The customer perspective
The financial perspective
The innovation and learning perspective

Ans: a
Q.68). The U.S. National Quality Award is named after
a)
b)
c)
d)

Joseph Juran
Genichi Taguchi
W. Edwards Deming
Malcolm Baldrige

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

a)
b)
c)
d)

Help turn strategy into action


Benchmark against competitors
Measure financial performance
Measure product quality

Ans: a
Q.70). The problem with using financial measures alone to measure organizational
performance is that:
a)
b)
c)
d)

They need to be compared with competitors to have any real meaning


They are only understood by accountants
There are many different measures available
The measures are usually contradictory

Ans: a
Q.71). Which of the following is not true with reference capital budgeting?
a)
b)
c)
d)

Capital budgeting is related to asset replacement decisions,


Cost of capital is equal to minimum required return,
Existing investment in a project is not treated as sunk cost,
Timing of cash flows is relevant.

Ans: c

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


a)
b)
c)
d)

Cash flows Principle,


Interest Exclusion Principle,
Accrual Principle,
Post-tax Principle.

Ans: c
Q.73). Which of the following is not true for capital budgeting?
a)
b)
c)
d)

Sunk costs are ignored,


Opportunity costs are excluded,
Incremental cash flows are considered,
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)
b)
c)
d)

Cash Flows are easy to calculate,


Cash Flows are suggested by SEBI,
Cash is more important than profit,
None of the above.

Ans: c
Q.76). Which of the following is not included in incremental A flows?
a)
b)
c)
d)

Opportunity Costs,
Sunk Costs,
Change in Working Capital,
Inflation effect.

Ans: b

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


a)
b)
c)
d)

Is related to Fixed Assets,


Brings long-term benefits,
Brings short-term benefits only,
Has very large investment.

Ans: c
Q.78). In Capital Budgeting, Sunk cost is excluded because it is:
a)
b)
c)
d)

Of Small Amount,
Not Incremental,
Not Reversible,
All of the Above.

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

An Inflow,
An Outflow,
Nil,
None of the above.

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

Increase both ROE and ROA.


Increase ROE but not ROA.
Increase ROA but not ROE.
Increase neither ROA nor ROE.

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

Increase both ROE and ROA.


Increase ROE but not ROA.
Increase ROA but not ROE.
Increase neither ROA nor ROE.

Ans: a

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

Increase both ROE and ROA.


Increase ROE but not ROA.
Increase ROA but not ROE.
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)
b)
c)
d)

Customer solutions
Operations Theme
Strategic Competencies
Productivity Strategy

Ans: d
Q.84). Identify the correct link for Customer Perspective in The Complete Balanced Scorecard
Strategy Map
a)
b)
c)
d)

Product Leader
Innovation Theme
Revenue Growth Strategy
Organization Alignment

Ans: a
Q.85). Internal Perspective is part of the Complete Balanced Scorecard Strategy. This is a
correct sub item for this perspective
a) Regulatory and Society Theme
b) Customer solutions
c) Strategic Technologies
d) 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 Perspective
a) Improve shareholder value
b) Low total cost
c) Operations theme
d) Strategic technologies
Ans: d
Q.87). Nonprofit and government organizations (NPGOs)
a)
b)
c)
d)

Are unable to use the BSC effectively


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

Ans: c
Q.88). The process of evaluating an employees current and/or past performance relative to his
or her performance standards is called _____.
a)
b)
c)
d)

recruitment
employee selection
performance appraisal
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)
f)
g)
h)
Ans: c

Some companies use too few measures in their score


Some companies include too many measures
A poor scorecard is the biggest threat and one of the dangerous pitfalls
Some companies do not know how to implement the effective drivers of performance

Q.90). Which of the following statements regarding flaws suffered by financial measures is not
correct:
a) They are hard to quantify
b) They do little to motivate employees to improve accounting profits
c) They are not effective in getting managers' attention
d) 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 listed
a) Financial perspective
b) Customer perspective
c) Learning and growth perspective
d) Internal business perspective
Ans: a
Q.92). Which one of the following is not one of the Balanced Scorecards four generic
perspectives
a)
b)
c)
d)

Internal business processes


Innovation and learning
Financial
Marketing and advertising

Ans: d
Q.93). Which one of the following is a lag performance indicator
a)
b)
c)
d)

Number of training hours per employee


Return on capital employed
Number of complaints received from customers
Output per employee

Ans: b
Q.94). Which one of the following statements is true
a)
b)
c)
d)

Balanced Scorecards can only be updated on an annual basis


Balanced Scorecards always have four perspectives
Balanced Scorecards can be used in Not-for-Profit organisations
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 dashboard

b) Can be cascaded to different levels/parts of organisations


c) Cannot be used in conjunction with budgetary control systems
d) 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 strategy
d) 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)
b)
c)
d)

Six Sigma
Total Quality Management (TQM)
Zero Defect
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)
b)
c)
d)

the Deming Prize


Malcolm Baldridge National Quality Award
the J.D. Power Award
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
companys strategy, it is called _____.
a)
b)
c)
d)
Ans: b

Strategic organizational development


Performance management
Performance appraisal
Human resource management

Q.100).
Performance management combines performance appraisal with _____ to
ensure that employee performance is supportive of corporate goals.
a)
b)
c)
d)
Ans: c

Goal setting
Absenteeism
Incentive systems & Goal setting
Strategic management