Residual Income Is Sometimes Used to Overcome the Tendency of ROI

question 76

True/False

Residual income is sometimes used to overcome the tendency of ROI to discourage investments that are profitable for the company, but that lower the division's ROI.

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Definitions:

Generates Revenues

The process of creating income for a business through various activities such as sales, services, and investments.

Cost Center

A department or segment within a business that does not directly generate revenue but incurs costs, used for performance evaluation and budgeting.

Revenue Center

A segment of a business responsible for generating revenue through its operations and sales activities.

Profit Center

A part of a company that directly contributes to its profit through its operations and management.