A Disadvantage to Using the Residual Income Performance Measure Is

question 210

True/False

A disadvantage to using the residual income performance measure is that it encourages managers to spend only the minimum acceptable return on assets set by upper management.

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Definitions:

Singapore Dollars (SGD)

The official currency of Singapore, represented by the symbol S$.

Cash-flow Hedge

A hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability, or a forecasted transaction.

Financial Statements

Financial statements are written records that convey the business activities and the financial performance of a company, including balance sheet, income statement, and cash flow statement.

Net Income

Net income is the total profit of a company after all expenses and taxes have been subtracted from total revenue.