If a Company Division Has a Negative RI (Residual Income,)

question 50

True/False

If a company division has a negative RI (residual income,) that means that the division did NOT use its assets as effectively as management expected.

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Definitions:

Tax-loss Selling

The practice of selling securities at a loss to offset a capital gains tax liability.

Capital Losses

The loss incurred when a capital asset is sold for less than its original purchase price.

Endowment Funds

Long-term funds established by donations that are meant to support a particular organization or cause, where the principal remains intact and the investment income is used for specific purposes.

Investment Time Horizon

The length of time an investor expects to hold an investment before taking the money out.