Which of the Following Is the Most Appropriate and Comprehensive

question 77

Multiple Choice

Which of the following is the most appropriate and comprehensive short-term financial-performance indicator for an investment center that is a division of a larger business entity?

• A) Residual income (RI).
• B) Operating income, pre-tax.
• C) Return on equity (ROE).
• D) Operating income, after-tax.
• E) Return on sales (ROS).

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Definitions:

Accounting Sense

Pertains to the manner in which financial transactions are recorded and understood within the realm of accounting.

Financial Sense

Pertains to the practical and prudent management of money and financial resources to achieve set goals effectively.

Operating Cash Flow

Cash generated from the core business operations of a company, excluding financing and investing activities.

Marginal Revenue

The additional revenue that a company generates by selling one more unit of a product.