40. Household Brands Inc. (HBI) manufactures household goods in the United States. The
company made two acquisitions in previous years to diversify their product lines. In 2008, HBI
acquired cosmetics and consumer electronics companies. HBI is now, in 2016, 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:
Revenue Operating Income Assets
Cosmetics
2014 $24,500 $2,300 $10,000
2015 22,500 1,900 10,000
2016 19,600 1,800 9,500
Household
2014 17,400 1,300 7,500
2015 15,300 1,100 8,000
2016 12,500 900 6,500
Electronics
2014 13,500 1,500 4,500
2015 9,500 1,100 4,500
2016 8,700 1,050 4,300
Best Brands Total
2014 55,400 5,100 22,000
2015 47,300 4,100 22,500
2016 40,800 3,750 20,300
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 2014 is:
41. Household Brands Inc. (HBI) manufactures household goods in the United States. The
company made two acquisitions in previous years to diversify their product lines. In 2008, HBI
acquired cosmetics and consumer electronics companies. HBI is now, in 2016, 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:
Revenue Operating Income Assets
Cosmetics
2014 $24,500 $2,300 $10,000
2015 22,500 1,900 10,000
2016 19,600 1,800 9,500
Household
2014 17,400 1,300 7,500
2015 15,300 1,100 8,000
2016 12,500 900 6,500
Electronics
2014 13,500 1,500 4,500
2015 9,500 1,100 4,500
2016 8,700 1,050 4,300
Best Brands Total
2014 55,400 5,100 22,000
2015 47,300 4,100 22,500
2016 40,800 3,750 20,300
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 2015 is:
42. Household Brands Inc. (HBI) manufactures household goods in the United States. The
company made two acquisitions in previous years to diversify their product lines. In 2008, HBI
acquired cosmetics and consumer electronics companies. HBI is now, in 2016, 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:
Revenue Operating Income Assets
Cosmetics
2014 $24,500 $2,300 $10,000
2015 22,500 1,900 10,000
2016 19,600 1,800 9,500
Household
2014 17,400 1,300 7,500
2015 15,300 1,100 8,000
2016 12,500 900 6,500
Electronics
2014 13,500 1,500 4,500
2015 9,500 1,100 4,500
2016 8,700 1,050 4,300
Best Brands Total
2014 55,400 5,100 22,000
2015 47,300 4,100 22,500
2016 40,800 3,750 20,300
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 2016 is:
43. Household Brands Inc. (HBI) manufactures household goods in the United States. The
company made two acquisitions in previous years to diversify their product lines. In 2008, HBI
acquired cosmetics and consumer electronics companies. HBI is now, in 2016, 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:
Revenue Operating Income Assets
Cosmetics
2014 $24,500 $2,300 $10,000
2015 22,500 1,900 10,000
2016 19,600 1,800 9,500
Household
2014 17,400 1,300 7,500
2015 15,300 1,100 8,000
2016 12,500 900 6,500
Electronics
2014 13,500 1,500 4,500
2015 9,500 1,100 4,500
2016 8,700 1,050 4,300
Best Brands Total
2014 55,400 5,100 22,000
2015 47,300 4,100 22,500
2016 40,800 3,750 20,300
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 2014 is:
44. Household Brands Inc. (HBI) manufactures household goods in the United States. The
company made two acquisitions in previous years to diversify their product lines. In 2008, HBI
acquired cosmetics and consumer electronics companies. HBI is now, in 2016, 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:
Revenue Operating Income Assets
Cosmetics
2014 $24,500 $2,300 $10,000
2015 22,500 1,900 10,000
2016 19,600 1,800 9,500
Household
2014 17,400 1,300 7,500
2015 15,300 1,100 8,000
2016 12,500 900 6,500
Electronics
2014 13,500 1,500 4,500
2015 9,500 1,100 4,500
2016 8,700 1,050 4,300
Best Brands Total
2014 55,400 5,100 22,000
2015 47,300 4,100 22,500
2016 40,800 3,750 20,300
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 2015 is (rounded):
45. Household Brands Inc. (HBI) manufactures household goods in the United States. The
company made two acquisitions in previous years to diversify their product lines. In 2008, HBI
acquired cosmetics and consumer electronics companies. HBI is now, in 2016, 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:
Revenue Operating Income Assets
Cosmetics
2014 $24,500 $2,300 $10,000
2015 22,500 1,900 10,000
2016 19,600 1,800 9,500
Household
2014 17,400 1,300 7,500
2015 15,300 1,100 8,000
2016 12,500 900 6,500
Electronics
2014 13,500 1,500 4,500
2015 9,500 1,100 4,500
2016 8,700 1,050 4,300
Best Brands Total
2014 55,400 5,100 22,000
2015 47,300 4,100 22,500
2016 40,800 3,750 20,300
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 2016 is (rounded):
46. An increase in the market price of a company’s common stock will immediately affect its:
47. Compensation plans for high-level managers and executives are usually explained in the
firm’s:
48. In service firms, financial results can be measured by all of the following except:
49. Which of the following would not play a strategic role in management compensation?
50. Which one of the following has been the most common payment option for bonus
compensation in recent years?
51. Common bases of bonus compensation include:
Choice
Stock
price
Balanced
scorecard Strategic
performance
measure
A. No No Yes
B. Yes Yes Yes
C. Yes No No
D. Yes Yes No
E. No Yes Yes
52. Which of the following would explain why a manager would elect to defer bonus
compensation to future years?
53. Firms typically provide benefits (perks) to employees to enhance motivation. Which of the
following would not be an example of a perk?
54. The commonly used approaches for business valuation include:
Financial
Analysis Profitability
& Efficiency
Analysis
Discounted
Cash Flow
A) Yes Yes No
B) Yes No No
C) No Yes Yes
D) No No Yes
E) Yes No Yes
55. Which of the following is a liquidity ratio?
56. EVA is the acronym for:
57. EVA is calculated as:
58. Methods for directly valuing a firm include:
Earnings
Multiple Discounted
Cash Flow Financial
Ratios
A) Yes Yes Yes
B) No Yes Yes
C) No No Yes
D) Yes Yes No
E) Yes No Yes