Managerial Accounting - Chapter 10 Vocab
Terms
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- Decentralization
- The delegation of freedom to make decisions. The lower in the organization that this freedom exists, the greater the decentralization
- Segment Autonomy
- The delegation of decision-making power to managers of segments of an organization
- Incentives
- Those informal and formal performance-based rewards that enhance managerial effort toward organizational goals
- Agency Theory
- A theory that deals with contracting between an organization and the managers that it hires to make decisions on its behalf
- Return on Investment (ROI)
- A measure of income or profit divided by the investmenet required to obtain that income or profit
- Return on Sales
- Income divided by revenue
- Capital Turnover
- Revenue divided by invested capital
- Residual Income (RI)
- After-tax operating income less a capital charge
- Capital Charge
- Company's cost of capital x amount of investment
- Cost of Capital
- What a firm must pay to acquire more capital, whether or not it actually has to acquire more capital
- Economic Value Added (EVA)
- Equals adjusted after-tax operating income minus the cost of invested capital multiplied by the adjusted average invested capital
- Gross Book Value
- The original cost of an asset before deducting accumulated depreciation
- Net Book Value
- The original cost of an asset less any accumulatged depreciation
- Transfer Price
- The price that one segment of an organization charges another segment of the same organizatgion for a product or service
- Dysfunctional Decision
- Any decision that is in conflict with organizational goals
- Management By Objectives (MBO)
- The joint formulation by a manager and his or her superior of a set of goals and plans for achieving the goals for a forthcoming period