Suppose a Manager's Performance Is to Be Evaluated by Residual

question 179

Multiple Choice

Suppose a manager's performance is to be evaluated by residual income.Which of the following will NOT result in an increase in the residual income figure for this manager,assuming other factors remain constant?

• A) An increase in sales.
• B) An increase in the minimum required rate of return.
• C) A decrease in expenses.
• D) A decrease in operating assets.

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Definitions:

Equity Method

Accounting for investments where the investing entity has significant influence, adjusting the investment value for earnings, losses, and dividends received.

Intercompany Profit

Profits generated from transactions between companies within the same corporate group, which may be eliminated during consolidation.

Net Increase/Decrease

This refers to the overall rise or fall in a particular financial metric or account over a specified period.

Bonds Payable

A long-term debt instrument issued by a company to investors, representing the amount it is obligated to pay back with interest.