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AICPA CPA-Business Exam - Topic 2 Question 54 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 54
Topic #: 2
[All CPA-Business Questions]

Of the following items, the one item that would not be considered in evaluating the adequacy of the budgeted annual operating income for a company is:

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Suggested Answer: D

Choice 'd' is correct. In evaluating the adequacy of the budgeted annual operating income, you would not use the internal rate of return calculation. The internal rate of return is used for capital budgeting.

Choices 'a', 'b', and 'c' are incorrect. Return on assets, long range profit objectives, industry average for earnings on sales, and earnings per share [not mentioned as an option] are all measures for evaluating the adequacy of the budgeted annual operating income.


by Jina at Jun 28, 2022, 11:17 PM

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Elza
4 months ago
Industry average for earnings on sales is key for comparison!
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Jennie
4 months ago
Long-range profit objectives? Seems relevant to me.
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Lenita
4 months ago
Wait, isn't return on assets important too?
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Josefa
4 months ago
I agree, D is the odd one out here!
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Alida
4 months ago
Definitely not D, internal rate of return isn't about operating income.
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Lucy
5 months ago
Long-range profit objectives seem relevant, but I can't recall if they directly impact the annual operating income assessment.
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Lai
5 months ago
I'm leaning towards option D, but I feel like I need to double-check how internal rate of return fits into the overall budget evaluation process.
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Tonette
5 months ago
I remember practicing a question similar to this, and I think return on assets is more about performance than budget adequacy.
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Colette
5 months ago
I think the internal rate of return might not be directly related to evaluating the budgeted annual operating income, but I'm not entirely sure.
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Gennie
5 months ago
Hmm, this looks like a tricky RBAC configuration issue. I'll need to carefully review the rules and their order to determine the best approach.
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Clement
5 months ago
I recall examples where decentralization is really beneficial, but in some cases, it also creates challenges. So, I feel like C is a strong option too.
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Ona
5 months ago
Okay, I've got this. The question is asking about the risk related to the ability to sell the investment quickly, so the answer has to be liquidity risk. That makes the most sense to me.
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