A company which favors the residual income approach to financial performance evaluation wants managers to ________.
A) concentrate on maximizing an absolute amount of dollars of residual income as opposed to a percentage yield as is the case with ROI
B) concentrate on maximizing a percentage return in excess of the cost of capital
C) maximize the investment turnover ratio
D) maximize return on sales

Question

Quizplus · Accepted Answer

The residual income approach focuses on maximizing an absolute dollar amount of residual income, which is the net operating income after subtracting a charge for the cost of capital employed in the business. This approach differs from ROI, which focuses on maximizing a percentage yield.

A Company Which Favors the Residual Income Approach to Financial