Measuring the success of a divisional Investment Center is closely tied to understanding whether or not the division meets profit expectations. To understand profits, two alternatives are proposed for tracking profitability: ROA and EVA. From the point of view of an economist, why is EVA usually preferred?
What will be an ideal response?
ROA is accounting net income divided by total assets. The problem with ROA is that assets are not measured at market value, and accounting net income excludes some increases in economic value. EVA uses the opportunity cost of capital and more accurately measures true economic cost of assets. EVA also estimates the economic profits of the firm.
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Economists use GDP to determine
A) the economic performance of a country over time. B) the well-being of a country's citizens. C) the financial stability of a nation. D) the overall money supply within a nation. E) all of the above.
A person who is out of work, available for work, but not seeking work is
a. counted as unemployed. b. part of the labor force. c. a discouraged worker. d. a fictionally unemployed person.
An increase in the capital-labor ratio is associated with
a. innovations b. a decrease in the capital-output ratio c. an increase in the capital-output ratio d. capital deepening e. technological improvement
The money price of a good is that price
A) expressed in constant 2017 dollars. B) expressed in purchasing power against a common item like bread. C) expressed in today's dollars. D) that would clear the market.