Answered: What is a major shortcoming of just…

Business

Accounting

What is a major shortcoming of just using Income from Operations as a performance measure for Investment Centers?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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What is the major shortcoming of using income from operations as a performance measure for investment centers?
Which of the followings is NOT an advantage of financial institutions in consumption smoothing? A. They help to solve moral hazard and adverse selection issues. B. They help to share risks. C. They help to reduce transaction costs. D. They help to create more jobs.
Please highlight a key flaw in utilizing income from operations as a performance indicator for investment centers.
Which of the following statements is true? The use of return on investment (ROI) as a performance measure may lead managers to reject a project that would be favorable for the company as a whole. Land held for possible plant expansion would be included as an operating asset when computing return on investment (ROI).
Which TWO of the following problems associated with performance measurement in a public sector organisation are true? There are usually multiple objectives which makes it difficult to prioritise a primary objective O These organisations often provide services for which it is difficult to define a cost unit These organisations are not often subjected to strong political influences over their activities Lack of a profit measure leads to lack of focus and difficulty in measuring performance
Please describe a significant disadvantage of utilizing income from operations as a performance indicator for investment centers.
2. Prepare the statement of owner's equity for the year ended December 31, 2016. Assume the owner had no additional contributions during the year. 3. Prepare the classified balance sheet at December 31, 2016. Use the report form. 4. Calculate the current ratio at December 31, 2016. 5. Journalize and post the closing entries. Indicate the balance of the Martinez, Capital account after the closing entries are posted. 6. Prepare a post-closing trial balance at December 31, 2016.
Please explain a major shortcoming of using income from operations as a performance measure for investment centers.