A Company Which Favors the Residual Income Approach to Financial

question 52

Multiple Choice

A company which favors the residual income approach to financial performance evaluation wants managers to ________.

• A) concentrate on maximizing an absolute amount of dollars of residual income as opposed to a percentage yield as is the case with ROI
• B) concentrate on maximizing a percentage return in excess of the cost of capital
• C) maximize the investment turnover ratio
• D) maximize return on sales

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Definitions:

Human Capital

Human capital refers to the skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organization or country.

Average Salaries

The mean income received by employees within a particular job, industry, or geographical area.

Compensating Differentials

Compensating Differentials are wage differences that arise between jobs due to the desirability of the job itself, including factors such as risk, work conditions, or location.

Systematic Discrimination

Processes and practices that lead to consistent and widespread unequal treatment of individuals based on race, gender, or other characteristics.