Because Residual Income (RI) Is a Dollar Amount, in Contrast

question 122

Multiple Choice

Because residual income (RI) is a dollar amount, in contrast to a percentage (like return on investment, ROI) , RI:

• A) Allows, through different discount rates, adjustment for differing levels of risk across investment centers within an organization.
• B) Cannot be used to evaluate the financial performance of a given investment center over time.
• C) Is less useful than ROI for performance evaluation purposes.
• D) Allows for differing investment amounts for different investment centers.
• E) Is less useful to stockholders of the company.

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Definitions:

Operating Angles

The specific angles at which certain mechanical parts, such as driveshafts, are designed to operate efficiently.

Propeller Shaft

The mechanical component used to transmit power from an engine or motor to the propeller in a boat or aircraft.

Universal Joints

Flexible joints used in drive shafts that allow for the transmission of power between shafts that are not aligned.