A Company May Prefer to Use Residual Income Over Return

question 228

Multiple Choice

A company may prefer to use residual income over return on investment for performance evaluation because ________.

• A) residual income is a ratio but return on investment is an absolute figure
• B) residual income is more likely to lead to goal congruence than return on investment
• C) residual income is easier to calculate than return on investment
• D) residual income considers three elements but return on investment considers only two elements

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Definitions:

Josiah Strong

A prominent American Protestant clergyman in the late 19th and early 20th centuries known for his strong support of American imperialism and Christian missionary work.

Consumers

Individuals or entities that purchase goods and services for personal use, driving demand in the economy.

White Man's Burden

A concept originating from a poem by Rudyard Kipling, interpreting the imperialist obligation of white people to govern and impart their culture to non-white people, often used to justify European colonialism.

Imperialism

A policy of extending a country's power and influence through colonization, use of military force, or other means.