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

question 44

Multiple Choice

The basic objective of the residual income (RI) approach to performance measurement is to have a division of a company 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 return.

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Definitions:

Organizational Identity

The self-concept of an organization based on its values, beliefs, culture, and ways of working, which distinguishes it from others.

Industry Structure

The organization and characteristics of a particular market or industry, including its competitive environment.

Strategic Choices

Decisions made by an organization's leaders about the direction and scope of the organization, influencing its competitive position and future success.

Diversification

A growth strategy to expand by acquisition of or investment in new and different business areas.