Managerial Performance Can Be Measured in Many Different Ways Including

question 40

Multiple Choice

Managerial performance can be measured in many different ways including return on investment (ROI) and residual income. A good reason for using residual income instead of ROI is that:

• A) residual income can be computed without regard to identifying an investment base.
• B) appropriate goal congruence behavior is more likely to occur when using residual income.
• C) residual income is well accepted in many organizations and often used in the financial press.
• D) ROI does not take into consideration both the investment turnover ratio and return-on-sales percentage.

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Definitions:

Agency Relationship

A legal and fiduciary relationship between two parties, where one, the agent, is authorized to act on behalf of the other, the principal, in business transactions.

Liability

A legal obligation or responsibility to settle a debt or make good on a promise or contract.

Third Parties

Individuals or entities that are not directly involved in a legal agreement or transaction but may be affected by it.

Actual Notice

Notice of agency termination that is given by directly informing third parties, either orally or in writing.