What Is a Weakness of Residual Income

question 98

Multiple Choice

What is a weakness of residual income?

• A)It discourages goal congruence.
• B)It can be misleading when comparing divisions of different sizes.
• C)It routinely results in managers rejecting investment opportunities that would be advantageous to the company as a whole.
• D)It does not take cost of capital into consideration.

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Definitions:

Brain's Activity

The brain's activity encompasses the various neurological processes and functions carried out by the brain including thought, perception, emotion, and coordination.

Cognitive Psychology

A branch of psychology that studies mental processes including how people think, perceive, remember, and learn.

Heuristics

Simple, efficient rules, either hard-coded by evolutionary processes or learned, that help in making decisions, forming judgments, or solving problems quickly and with minimal effort.

Financial Risks

Financial risks involve the potential loss of monetary investment or the possibility of not achieving the expected financial returns, affecting individuals or businesses.