The Basic Objective of the Residual Income (RI) Approach to Performance

question 13

Multiple Choice

The basic objective of the residual income (RI) approach to performance measurement of a business unit considered an investment center is to have the investment center maximize its:

• A) Return on investment.
• B) Imputed interest rate charge.
• C) Cash flows.
• D) Cash flows in excess of a desired minimum amount.
• E) Operating income in excess of a desired minimum dollar return.

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Definitions:

Double Rule

A method used in accounting to underline a summary amount twice to indicate a total, final, or especially significant figure.

End-Of-Period Spreadsheet

A comprehensive document or tool used to compile accounting information before finalizing financial statements, aiding in the review and adjustment of account balances.

Total

This refers to the sum or aggregate amount of any given set of numbers or measures.

Columns Balance

The process of verifying that the sum of debit values equals the sum of credit values in an accounting system, ensuring accuracy in records.