AICPA Exam CPA-Business Topic 1 Question 52 Discussion

Actual exam question for AICPA's CPA Business Environment and Concepts exam

Question #: 52
Topic #: 1

[All CPA Business Environment and Concepts Questions]

Micro Manufacturers uses a performance reporting system that combines both financial and nonfinancial measures to evaluate division performance. All of the following measure operational efficiency, except:

AOperating leverage.

BDays' sales in accounts receivables.

CInventory turnover.

DResidual income.

Show Suggested Answer

Suggested Answer: D

Choice 'd' is correct. Residual income measures profitability in excess of a target rate of return.

Operational efficiency is not considered.

Choices 'a', 'b', and 'c' are incorrect. Operating leverage, days' sales in accounts receivable, and inventory are all measures of operational efficiency, specifically, efficiency in managing working capital.

by Cecily at May 29, 2022, 08:29 PM

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