A Disadvantage to Using the Residual Income Performance Measure Is

question 40

True/False

A disadvantage to using the residual income performance measure is that it encourages managers to spend only the minimum acceptable rate of return on assets set by upper management.

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Definitions:

Predictive Validity

The extent to which a test's scores accurately forecast or correlate with future behavior, performance, or outcomes.

Concurrent Validity

The degree to which the results of a particular test or measurement correlate with those of a previously validated measure taken at the same time.

Content Validity

The extent to which a test measures all aspects of the content it's intended to cover.

Kuder-Richardson Reliability

A measure of the consistency of test scores across items within a test, commonly used to assess the reliability of dichotomously scored tests.