A Company May Prefer to Use Residual Income Over Return

question 94

Multiple Choice

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

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

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Definitions:

Appropriate Behaviors

Actions or reactions of an individual in a given situation that are considered suitable, acceptable, or desired according to societal norms or specific settings.

Punishment Procedures

Techniques used to decrease the likelihood of a behavior recurring, typically by introducing a negative consequence or withdrawing a positive stimulus.

Escape Conditioning

A term synonymous with negative reinforcement but tends to be more descriptive of the process.

Punished

The act of inflicting a penalty or consequence for inappropriate behavior or wrongdoing, often as a means of discouraging such behavior in the future.