Which of the Following Statements Contrasting Residual Income with Return

question 120

Multiple Choice

Which of the following statements contrasting residual income with return on investment is correct?

• A)ROI may lead to goal incongruence while residual income does not.
• B)ROI is a lagging indicator while residual income is a leading indicator.
• C)Residual income is a financial measure while return on investment emphasizes the customer perspective.
• D)Residual income is a long-term measure while ROI is a short-term measure.

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Definitions:

Functional Currency

It's the currency of the primary economic environment in which an entity operates and generates cash flows.

Exchange Rates

The price at which one currency can be exchanged for another, influencing international trade and investments.

Exchange Gain

A profit realized from the increase in value of foreign currency assets due to favorable changes in exchange rates.

Functional Currency

A company's primary currency used in its operations and financial reporting, often where the company principally generates and expends cash.