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:

Spontaneity

The quality of being performed or occurring as a result of sudden inner impulse or inclination without premeditation or external stimulus.

Incongruence

A discrepancy between a person’s self-concept and aspects of his or her experience.

Conditional Positive Self-Regard

A state where individuals approve of themselves based on meeting certain conditions or standards set by themselves or others.

Feelings of Self-Worth

The perception of one's own value or worth as a person.