Managerial Performance Can Be Measured in Various Ways, Including Return

question 87

Multiple Choice

Managerial performance can be measured in various ways, including return on investment (ROI) and residual income (RI) . A good reason for using RI rather than ROI is:

• A) RI can be computed without regard to identifying an investment base.
• B) Goal congruence is more likely to be promoted by using RI.
• C) RI is well understood and often used and discussed in the financial press.
• D) ROI does not take into consideration both the asset turnover (AT) ratio and the return-on-sales (ROS) percentage.
• E) An imputed interest rate (minimum rate of return) does not have to be specified.