CPFM Financial Performance Measurement 3

Question 1

A balanced scorecard evaluates performance across financial, customer, internal process, and which fourth perspective?

Accepted Answer

Learning and growth

Answer

The fourth perspective in Kaplan and Norton's balanced scorecard is learning and growth.

Question 2

If a firm's times-interest-earned ratio falls below 1.0, it indicates that:

Accepted Answer

Operating earnings cannot cover interest expense

Answer

A ratio below 1.0 means EBIT is insufficient to pay interest, signaling solvency risk.

Question 3

Which metric measures how many days, on average, it takes to collect receivables?

Accepted Answer

Days sales outstanding

Answer

Days sales outstanding (DSO) measures the average collection period for receivables.

Question 4

Residual income is calculated as net operating income minus:

Accepted Answer

A capital charge on invested assets

Answer

Residual income subtracts a minimum required return (capital charge) from operating income.

Question 5

A high gross profit margin combined with a low net profit margin most likely indicates:

Accepted Answer

High operating or overhead expenses

Answer

When gross margin is high but net margin is low, operating and overhead costs are eroding profit.

CPFM Practice Test