Residual Income Is a Better Measure for Performance Evaluation of an Investment

question 143

Multiple Choice

Residual income is a better measure for performance evaluation of an investment center manager than return on investment because: (CMA adapted)

• A) the problems associated with measuring the asset base are eliminated.
• B) desirable investment decisions are less likely to be neglected by high-return divisions.
• C) only the gross book value of assets needs to be calculated.
• D) the arguments about the implicit cost of interest are eliminated.

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