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.

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Definitions:

Redeemability

The quality of being able to be redeemed or converted into some form of value or benefit.

Redemption

The act of buying back something previously sold, such as a company repurchasing its own shares from investors.

Stated Capital

This refers to the capital that a corporation declares in its charter as its official capital.

Insolvent

A state in which an individual or entity cannot meet their financial obligations as debts come due, often leading to bankruptcy proceedings.