The Major Advantage of Residual Income as a Performance Measure

question 190

True/False

The major advantage of residual income as a performance measure is that it gives consideration to not only a minimum rate of return on investment but also the total magnitude of income from operations earned by each division.

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Definitions:

Instrument

Refers to a legal document formalizing an agreement or right, often used in financial transactions.

Certified Check

A check that is accepted by the bank from which the funds are drawn.

Accepted

A term indicating that an offer has been formally agreed to, creating a binding contract between parties.

Check

A special draft that orders a bank (the drawee) to pay a specified sum of money to the payee from the drawer’s account.