An advantage of the residual income measure over the return on investment measure is: residual income promotes goal congruence in decision making. comparability of divisions is enhanced with residual income. residual income uses net assets rather than gross assets as the investment base.
An advantage of the residual income measure over the return on investment measure is: residual income promotes goal congruence in decision making. comparability of divisions is enhanced with residual income. residual income uses net assets rather than gross assets as the investment base.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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An advantage of the residual income measure over the
- residual income promotes goal congruence in decision making.
- comparability of divisions is enhanced with residual income.
- residual income uses net assets rather than gross assets as the investment base.
- residual income uses operating income before interest and taxes rather than net income.
- Both 1 and 2 are correct.
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