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.

Question

Quizplus · Accepted Answer

Residual income encourages managers to accept projects that exceed the minimum required return, aligning their decisions with the company's overall profitability goals, unlike ROI which might lead to rejecting beneficial projects if they lower the overall ROI.

Managerial Performance Can Be Measured in Many Different Ways Including