Operational auditors use measures to evaluate performance, to identify and correct problems, and to discover opportunities. To assist in measuring achievement, a number of performance measures are available. To present a more complete picture of performance, it is strongly recommended that several of these performance measures be utilized and that they be combined with nonfinancial measures such as market share, new product development, and human resource utilization. Five commonly used performance measures that are derived from the traditional historical accounting system are

- Gross profit margin (percent).

- Cash flows.

- Return on investment in assets.

- Residual income.

- Total asset turnover.

Required:

For each of the five performance measures identified above,

a. Describe how the measure is calculated.

b. Describe the information provided by the measure.

c. Explain the limitations of this information.