Managerial Performance Can Be Measured in Many Different Ways Including

question 76

Multiple Choice

Managerial performance can be measured in many different ways including return on investment (ROI) and residual income. A good reason for using residual income instead of ROI is:

• A)Residual income can be computed without having to measure operating assets.
• B)Managers are more likely to accept projects that are beneficial to the company.
• C)ROI does not take into account both turnover and margin.
• D)A minimum rate of return does not have to be specified when the residual income approach is used.

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Definitions:

Preferred Stock

A class of ownership in a corporation that typically provides dividend payments before dividends are issued to common stockholders, often with no voting rights.

Common Stock

A type of security that signifies ownership within a corporation, known as corporate equity ownership.

Cumulative Feature

A characteristic of preferred stock that entitles shareholders to receive dividends that were omitted in the past before any dividends can be issued to common stockholders.

Preemptive Right

A shareholder's right to maintain their proportionate ownership by buying additional shares before they are offered to the public.