ACC206B Ch. 10
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What is a centralized organization
an organization where decisions are made by a particular group for the entire company (decentralized - decisions are made moreso by the department managers)
What is Agency Theory
an analysis of one party's delegation of authority over another party in terms of decisions to be made.
ROI (Return on Investment) =
income / investment = a %
ROS (Return on Sales) =
Net Operating Income (Profit) / Sales (Revenue)
Capital Turnover =
Sales (Revenue) / Investment
What is another name for Investment?
Average operating asset
Economic Profit (or Residual Income or RI) =
Net Operating Income - ( Min required ROI (or cost of capital) x investment )
Net operating profit after tax
gross book value is
the original cost of an asset
net book value is
the original cost of an asset less ad accumulated depreciation
transfer pricing is
the price that it costs a company to purchase between its own departments
What is the general rule for transfer pricing?
Transfer Price = Outlay Cost + Opportunity Cost
what are dysfunctional decisions
decisions in conflict with the company's goals
What would you like to do?
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