40.

Best Brand Inc. (BBI) manufactures
household goods in the United States. The company made two acquisitions in
previous years to diversify its product lines. In 2005, HPI acquired cosmetics
and consumer electronics companies. BBI is now, in 2010, comprised of three
divisions: cosmetics, household, and consumer electronics. The following
information (in thousands of dollars) presents operating revenues, operating
income, and invested assets of the company over the last three years:

.gif”>

The following
table shows the number of executives covered by the current compensation
package of HPI:
.jpg”>

The
current compensation package is an annual bonus award. The senior executives
share in the bonus pool. The pool is calculated as 20% of the annual residual
income of the company. The residual income is defined as operating income minus
a cost of capital charge of 15% of invested assets. Round all calculations to
two significant digits. The total amount of the bonus pool for 2008 is:

A.
$134,000.
B.
$218,000.
C.
$141,000.
D.
$174,000.
E.
$205,000.

41. Best
Brand Inc. (BBI) manufactures household goods in the United States. The company
made two acquisitions in previous years to diversify its product lines. In
2005, HPI acquired cosmetics and consumer electronics companies. BBI is now, in
2010, comprised of three divisions: cosmetics, household, and consumer
electronics. The following information (in thousands of dollars) presents
operating revenues, operating income, and invested assets of the company over
the last three years:
.jpg”>

The following
table shows the number of executives covered by the current compensation
package of HPI:
.jpg”>

The
current compensation package is an annual bonus award. The senior executives
share in the bonus pool. The pool is calculated as 20% of the annual residual
income of the company. The residual income is defined as operating income minus
a cost of capital charge of 15% of invested assets. Round all calculations to
two significant digits. The total amount of the bonus pool for 2009 is:

A.
$134,000.
B.
$218,000.
C.
$141,000.
D.
$174,000.
E.
$205,000.

42.

Best
Brand Inc. (BBI) manufactures household goods in the United States. The company
made two acquisitions in previous years to diversify its product lines. In
2005, HPI acquired cosmetics and consumer electronics companies. BBI is now, in
2010, comprised of three divisions: cosmetics, household, and consumer
electronics. The following information (in thousands of dollars) presents
operating revenues, operating income, and invested assets of the company over
the last three years:

.gif”>

The following
table shows the number of executives covered by the current compensation
package of HPI:
.jpg”>

The
current compensation package is an annual bonus award. The senior executives
share in the bonus pool. The pool is calculated as 20% of the annual residual
income of the company. The residual income is defined as operating income minus
a cost of capital charge of 15% of invested assets. Round all calculations to
two significant digits. The total amount of the bonus pool for 2010 is:

A.
$134,000.
B.
$218,000.
C.
$141,000.
D.
$174,000.
E.
$205,000.

43. Best
Brand Inc. (BBI) manufactures household goods in the United States. The company
made two acquisitions in previous years to diversify its product lines. In
2005, HPI acquired cosmetics and consumer electronics companies. BBI is now, in
2010, comprised of three divisions: cosmetics, household, and consumer
electronics. The following information (in thousands of dollars) presents
operating revenues, operating income, and invested assets of the company over
the last three years:
.jpg”>

The following
table shows the number of executives covered by the current compensation
package of HPI:
.jpg”>

The
current compensation package is an annual bonus award. The senior executives
share in the bonus pool. The pool is calculated as 20% of the annual residual
income of the company. The residual income is defined as operating income minus
a cost of capital charge of 15% of invested assets. Round all calculations to
two significant digits. Return on assets for the cosmetics division in 2008 is:

A.
19.00%
B.
22.00%
C.
16.00%
D.
18.95%

44.
Best
Brand Inc. (BBI) manufactures household goods in the United States. The company
made two acquisitions in previous years to diversify its product lines. In
2005, HPI acquired cosmetics and consumer electronics companies. BBI is now, in
2010, comprised of three divisions: cosmetics, household, and consumer
electronics. The following information (in thousands of dollars) presents
operating revenues, operating income, and invested assets of the company over
the last three years:
.jpg”>

The
following table shows the number of executives covered by the current
compensation package of HPI:
.jpg”>

The
current compensation package is an annual bonus award. The senior executives
share in the bonus pool. The pool is calculated as 20% of the annual residual
income of the company. The residual income is defined as operating income minus
a cost of capital charge of 15% of invested assets. Round all calculations to
two significant digits. Return on sales in the household division in 2009 is
(rounded):

A.
6.34%
B.
7.69%
C.
7.88%
D.
8.54%

45. Best
Brand Inc. (BBI) manufactures household goods in the United States. The company
made two acquisitions in previous years to diversify its product lines. In
2005, HPI acquired cosmetics and consumer electronics companies. BBI is now, in
2010, comprised of three divisions: cosmetics, household, and consumer
electronics. The following information (in thousands of dollars) presents
operating revenues, operating income, and invested assets of the company over
the last three years:
.jpg”>

The following
table shows the number of executives covered by the current compensation
package of HPI:
.jpg”>

The
current compensation package is an annual bonus award. The senior executives
share in the bonus pool. The pool is calculated as 20% of the annual residual
income of the company. The residual income is defined as operating income minus
a cost of capital charge of 15% of invested assets. Round all calculations to
two significant digits. Asset turnover in the electronics division in 2010 is
(rounded):

A.
1.82
B.
2.02
C.
.733
D.
2.31

46.
An increase in the market price of a company’s common stock will immediately
affect its:

A.
Stock return.
B.
Debt to equity ratio.
C.
Earnings per share.
D.
Economic value added.
E.
Return on common
stockholders’ equity.

47. Compensation
plans for high-level managers and executives are usually explained in the
firm’s:

A.
Management Discussion and Analysis
(MD&A).
B.
Income Statement.
C.
Notes to the Financial
Statements.
D.
Proxy Statement.

48.
In service firms, financial results can be measured by all the following except:

A.
Staff utilization.
B.
The profit multiplier.
C.
Collections of accounts.

D.
Throughput.

49.
Which of the following aspects would not play a strategic role in
management compensation?

A.
Ethical issues.
B.
Strategic conditions
facing the firm.
C.
The effect of comparable
positions within the industry.
D.
The effect of risk
aversion on managers’ decision making.

50.
Which one of the following has been the most common payment option for bonus
compensation in recent years?

A.
Vacation time.
B.
Stock options.
C.
Increased benefits.
D.
Salary increase.

51.
Common bases of bonus compensation include:
.jpg”>

A.
A
B.
B
C.
C
D.
D
E.
E

52.
Which of the following would explain why a manager would elect to defer bonus
compensation to future years?

A.
Interest rates are expected to decrease.

B.
The firm will be issuing
an initial public offering in the near future.
C.
To show dedication to
the company.
D.
To avoid or defer taxes.

53.
Firms typically provide benefits (perks) to employees to enhance motivation.
Which of the following would not be an example of a perk?

A.
Company car.
B.
Country club membership.

C.
Stock options.
D.
Executive life
insurance.

54.
The commonly used approaches for business valuation include:
.jpg”>

A.
A
B.
B
C.
C
D.
D
E.
E

55.
Which of the following is a liquidity ratio?

A.
Gross margin ratio.
B.
Return on Assets ratio.
C.
Quick ratio.
D.
Earnings per share.

56. EVA
is the acronym for:

A.
Extra Value Assets.
B.
Economic Volume
Analysis.
C.
Efficiency Volume
Analysis.
D.
Economic Value Added.

57.
EVA is calculated as:

A.
EVA Net Income – (Cost of Capital x EVA
Invested Capital).
B.
Total Net Income – (Cost
of Capital x Invested Capital).
C.
Gross Income – Cost of
Capital.
D.
Total Net Income – EVA
Net Income.
E.
Accounting earnings
adjusted for EVA.

58.
Methods for directly valuing a firm include:
.jpg”>

A.
A
B.
B
C.
C
D.
D
E.
E

59.
There is a common concern today that executive compensation in the U. S. is:

A.
Not adequately linked to strategic
performance measures
B.
Ineffective as a
performance incentive
C.
Not properly disclosed
to the IRS
D.
Varies too greatly from
industry to industry

60.
Salary is:

A.
A fixed payment that includes a bonus.
B.
A fixed payment that
includes benefits.
C.
A benefit that includes
a bonus.
D.
A fixed payment.