Q.1 Which of the following is a non-financial performance measure?
Return on Investment (ROI)
Customer Satisfaction
Net Profit Margin
Earnings per Share
Explanation - Non-financial performance measures focus on qualitative aspects like customer satisfaction, employee engagement, and product quality.
Correct answer is: Customer Satisfaction
Q.2 The Balanced Scorecard framework includes which of the following perspectives?
Financial, Customer, Internal Processes, Learning & Growth
Financial, Operations, Marketing, HR
Finance, Technology, Production, Distribution
Cost, Profit, Sales, Cash Flow
Explanation - Balanced Scorecard evaluates performance across financial and non-financial dimensions, including learning and growth.
Correct answer is: Financial, Customer, Internal Processes, Learning & Growth
Q.3 Residual Income (RI) is calculated as:
Net Income ÷ Assets
Operating Profit – (Capital Employed × Cost of Capital)
Revenue – Variable Costs
Operating Profit ÷ Capital Employed
Explanation - Residual Income measures profit after deducting the cost of capital on invested assets.
Correct answer is: Operating Profit – (Capital Employed × Cost of Capital)
Q.4 A key limitation of ROI as a performance measure is that:
It encourages under-investment
It ignores profitability
It is difficult to calculate
It does not consider assets
Explanation - Managers may reject profitable projects if they reduce the average ROI, leading to under-investment.
Correct answer is: It encourages under-investment
Q.5 Variance analysis is primarily used for:
Measuring profitability
Comparing budgeted and actual results
Identifying new markets
Measuring customer satisfaction
Explanation - Variance analysis highlights deviations between actual and planned performance to aid control.
Correct answer is: Comparing budgeted and actual results
Q.6 Which measure focuses on the value created for shareholders after deducting the cost of capital?
Residual Income
EVA (Economic Value Added)
Gross Profit
Net Operating Profit
Explanation - EVA assesses true economic profit by considering cost of capital.
Correct answer is: EVA (Economic Value Added)
Q.7 Which perspective of the Balanced Scorecard emphasizes innovation and employee capabilities?
Customer
Financial
Learning & Growth
Internal Process
Explanation - Learning & Growth focuses on skills, innovation, and organizational improvement.
Correct answer is: Learning & Growth
Q.8 Benchmarking is best described as:
Comparing actual results with budgeted results
Setting minimum performance standards
Comparing performance with industry best practices
Evaluating employee performance only
Explanation - Benchmarking identifies gaps by comparing organizational performance with best-in-class standards.
Correct answer is: Comparing performance with industry best practices
Q.9 In management accounting, KPIs stand for:
Key Profit Indicators
Key Performance Indicators
Knowledge Process Inputs
Key Planning Initiatives
Explanation - KPIs are quantifiable measures used to track performance against strategic goals.
Correct answer is: Key Performance Indicators
Q.10 A flexible budget adjusts for:
Inflation rates
Changes in activity levels
Market prices
Tax rates
Explanation - Flexible budgets allow adjustments for variations in output or activity levels.
Correct answer is: Changes in activity levels
Q.11 Which performance measure considers both profitability and investment base?
Net Profit Margin
Return on Investment (ROI)
Contribution Margin
Operating Income
Explanation - ROI relates operating profit to the assets employed, linking profit to investment size.
Correct answer is: Return on Investment (ROI)
Q.12 Standard costing helps management by:
Setting minimum selling prices
Facilitating variance analysis
Measuring customer satisfaction
Tracking market share
Explanation - Standard costs provide benchmarks for comparing actual performance.
Correct answer is: Facilitating variance analysis
Q.13 Which of the following is a lagging indicator?
Customer satisfaction
Market share
Employee training hours
Net Profit
Explanation - Lagging indicators measure outcomes of past actions, such as profits.
Correct answer is: Net Profit
Q.14 Throughput accounting emphasizes:
Contribution margin per unit
Maximizing profit through bottleneck resources
Cost minimization
Eliminating fixed costs
Explanation - Throughput accounting focuses on constraints and bottleneck optimization.
Correct answer is: Maximizing profit through bottleneck resources
Q.15 Balanced Scorecard was developed by:
Taylor and Fayol
Kaplan and Norton
Drucker and Deming
Porter and Ansoff
Explanation - Robert Kaplan and David Norton introduced the Balanced Scorecard in the 1990s.
Correct answer is: Kaplan and Norton
Q.16 Which performance measure aligns with shareholder wealth maximization?
Earnings per Share
Economic Value Added (EVA)
Net Profit Margin
Contribution Margin
Explanation - EVA directly links to value creation beyond cost of capital, aligning with shareholder interests.
Correct answer is: Economic Value Added (EVA)
Q.17 Which ratio measures efficiency in using assets to generate sales?
Current Ratio
Asset Turnover Ratio
Debt-to-Equity Ratio
Gross Profit Margin
Explanation - Asset Turnover indicates how efficiently assets generate revenue.
Correct answer is: Asset Turnover Ratio
Q.18 The DuPont analysis breaks ROI into:
Net Profit Margin × Asset Turnover
Net Profit ÷ Sales
Operating Profit ÷ Equity
Revenue ÷ Assets
Explanation - DuPont model decomposes ROI to analyze profitability and efficiency separately.
Correct answer is: Net Profit Margin × Asset Turnover
Q.19 Which is an example of a leading indicator?
Employee training hours
Profit margin
Net income
Earnings per Share
Explanation - Leading indicators predict future performance, like training leading to better productivity.
Correct answer is: Employee training hours
Q.20 Profit Variance measures the difference between:
Actual and Standard Costs
Budgeted and Actual Profits
Fixed and Variable Costs
Gross and Net Profits
Explanation - Profit variance highlights how actual profit differs from planned profit.
Correct answer is: Budgeted and Actual Profits
Q.21 Key performance measures in service industries often emphasize:
Inventory turnover
Customer satisfaction and quality
Fixed asset utilization
Production efficiency
Explanation - Service industries focus more on quality, responsiveness, and customer perception.
Correct answer is: Customer satisfaction and quality
Q.22 A limitation of variance analysis is:
It focuses on past performance
It cannot be applied in manufacturing
It does not involve costs
It ignores budgets
Explanation - Variance analysis is backward-looking and may not help proactive decision-making.
Correct answer is: It focuses on past performance
Q.23 Which type of performance report is most useful for senior management?
Detailed operational reports
Summarized strategic reports
Daily transaction logs
Departmental time sheets
Explanation - Senior management needs concise, high-level reports for decision-making.
Correct answer is: Summarized strategic reports
Q.24 Contribution margin is calculated as:
Sales – Variable Costs
Sales – Fixed Costs
Sales – Total Costs
Sales – Operating Costs
Explanation - Contribution margin shows revenue left after covering variable costs, contributing to fixed costs and profit.
Correct answer is: Sales – Variable Costs
Q.25 Which measure evaluates short-term liquidity?
Current Ratio
Return on Assets
Residual Income
EVA
Explanation - Current ratio compares current assets to current liabilities, showing liquidity position.
Correct answer is: Current Ratio