| capital turnover | Sales revenue divided by invested capital.
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| cash bonus | See pay for performance.
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| economic value added (EVA) | An investment center's after-tax operating income minus the investment center's total assets (net of its current liabilities) times the company's weighted-average cost of capital.
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| full (or absorption) cost | A product's variable cost plus an allocated portion of fixed overhead.
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| goal congruence | A meshing of objectives, where managers throughout an organization strive to achieve the goals set by top management.
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| imperfect competition | A market in which a single producer or group of producers can affect the market price.
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| incentive compensation | See pay for performance.
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| internal control | A process designed to provide reasonable assurance regarding the achievement of objectives in the following categories: effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations.
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| investment center | A responsibility center whose manager is accountable for its profit and for the capital invested to generate that profit.
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| management by objectives (MBO) | The process of designating the objectives of each subunit in an organization and planning for the achievement of these objectives. Managers at all levels participate in setting goals, which they then will strive to achieve.
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| merit pay | See pay for performance.
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| pay for performance | A one-time cash payment to an investment- center manager as a reward for meeting a predetermined criterion on a specified performance measure.
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| perfect competition | A market in which the price does not depend on the quantity sold by any one producer.
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| residual income | Profit minus an imputed interest charge, which is equal to the invested capital times an imputed interest rate.
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| return on investment (ROI) | Income divided by invested capital.
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| sales margin | Income divided by sales revenue.
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| shareholder value analysis | Calculation of the residual income associated with a major product line, with the objective of determining how the product line affects a firm's value to its shareholders.
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| transfer price | The price at which products or services are transferred between two divisions in an organization.
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| weighted-average cost of capital (WACC) | A weighted average of the after-tax cost of debt capital and the cost of equity capital.
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