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AICPA CPA-Business Exam - Topic 1 Question 53 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 53
Topic #: 1
[All CPA-Business Questions]

The selection of the denominator in the return on investment (ROI) formula is critical to the measure's effectiveness. Which denominator is criticized because it combines the effects of operating decisions made at one level of the organization with financing decisions made at another organization level?

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Suggested Answer: D

Choice 'd' is correct. Shareholders' equity is the ROI denominator that has been criticized because it combines the effects of operating decisions made at another organization level.

Choices 'a', 'b', and 'c' are incorrect, per the above Explanation:.


by Regenia at Jun 14, 2022, 09:38 PM

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France
4 months ago
Yeah, total assets employed definitely has its flaws.
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Sanjuana
4 months ago
I thought shareholder's equity was the main issue here?
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Ahmad
4 months ago
Wait, are we sure about that? Seems a bit off to me.
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Eliseo
4 months ago
Totally agree, it can skew the ROI results!
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Octavio
4 months ago
Total assets employed is often criticized for mixing operating and financing decisions.
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Queen
5 months ago
I'm leaning towards C, working capital plus other assets, but I’m uncertain if that really combines the decisions at different levels.
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Suzi
5 months ago
I feel like we had a practice question about this, and it mentioned shareholder's equity being a better measure, but I can't recall the details.
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Jose
5 months ago
I think the answer might be A, total assets available, but I'm not completely sure why it's criticized.
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Renay
5 months ago
I remember discussing how total assets employed can mix operating and financing decisions, so maybe that's the right choice?
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Colette
5 months ago
Okay, let's see here. I'm pretty sure the answer is using an overhead group and an overhead key, since that's the most common way to assign overhead costs. But I'll double-check the other options just to be sure.
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Nidia
5 months ago
Ah, I remember learning about this in class. The main purpose of ITSM tools is to improve service delivery, not just control staff or meet specific standards. I'm confident I can get this one right.
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Rasheeda
5 months ago
Hmm, I'm not too sure about this one. I know Vagrant is used to manage virtual machines, but I'm not familiar with the details of how it actually runs them. I'll have to think this through carefully.
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