ExamGecko
Question list
Search
Search

List of questions

Search

Question 137 - CSCP discussion

Report
Export

A firm is undertaking a revision of its financial metrics to make them more comprehensive and has decided to use metrics such as return on investment (ROI), return on assets (ROA), and economic value added (EVA). This is an example of utilizing which of the following types of metrics?

A.
Activity based
Answers
A.
Activity based
B.
Stakeholder focused
Answers
B.
Stakeholder focused
C.
Financial sustainability
Answers
C.
Financial sustainability
D.
Value chain
Answers
D.
Value chain
Suggested answer: C

Explanation:

Financial Metrics Overview: Return on Investment (ROI), Return on Assets (ROA), and Economic Value Added (EVA) are key financial metrics used by firms to assess their financial performance.

ROI: Measures the profitability of investments relative to their cost, providing insights into how effectively the firm is using its capital to generate profits.

ROA: Indicates how efficiently a company is using its assets to generate earnings, reflecting overall operational efficiency.

EVA: Measures a company's financial performance based on residual wealth, calculated by deducting the cost of capital from its operating profit, highlighting value creation for shareholders.

Financial Sustainability: Utilizing these metrics helps a firm understand its financial health and long-term viability, ensuring that it can sustain operations and generate value over time. By focusing on comprehensive financial metrics, the firm can make informed decisions that support sustainable growth and profitability.

Kaplan, R. S., & Norton, D. P. (1996). The Balanced Scorecard: Translating Strategy into Action. Harvard Business Review Press.

Stewart, G. B. (1991). The Quest for Value: The EVA Management Guide. HarperBusiness.

asked 16/09/2024
Nestor Quintero
40 questions
User
Your answer:
0 comments
Sorted by

Leave a comment first