Suppose a Company Evaluates Divisional Performance Using Both ROI and Residual

question 102

True/False

Suppose a company evaluates divisional performance using both ROI and residual income. The company's minimum required rate of return for the purposes of residual income calculations is 12%. If a division has a residual income of $6,000, then its ROI is greater than 12%.

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Definitions:

Production Possibilities Frontier

A curve depicting the maximum attainable combinations of two or more products given a fixed amount of resources.

The 1940s

A decade marked by significant events including World War II and its aftermath, leading to major economic, political, and social changes globally.

The 1930s

The 1930s refers to the decade characterized by the Great Depression, significant economic downturns, and social upheavals globally.

Opportunity Cost

The value lost by not selecting the second-best option available, indicative of the trade-offs inherent in decision-making processes.