Suppose a manager's performance is to be measured by residual income.Which of the following will not result in an increase in the residual income figure for this manager,assuming other factors remain constant?

Question

Quizplus · Accepted Answer

An increase in the minimum required rate of return would decrease residual income, as it raises the hurdle that must be cleared to create excess income. An increase in sales or a decrease in expenses increases excess income and therefore increases residual income. A decrease in operating assets increases residual income as it reduces the amount of investment needed to generate a given level of income.

Suppose a Manager's Performance Is to Be Measured by Residual