Answered: Explain and compare how return on…

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Explain and compare how return on investment and residual income are used to evaluate investment center performance

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter9: Responsibility Accounting And Decentralization

Section: Chapter Questions

Problem 19Q: Explain the benefits of a return on investment structure within an investment center framework. It...

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Explain and compare how return on investment and residual income are used to evaluate investment center performance

Formula Formula ROI (%) = Net Income Principal Amount × 100

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Explain the benefits of a return on investment structure within an investment center framework. It may help to think of an example using an existing company.
Explain the benefits of a residual income structure within an investment center framework. It may help to think of an example using an existing company.
What is the major shortcoming of using operating income as a performance measure for investment centers?
Show and compare how return on investment and residual income are used to evaluate the performance of investment centers.
Show and contrast how return on investment and residual income are used to evaluate the performance of investment centers.
Demonstrate and compare how return on investment and residual income are used to assess the success of investment centers.
Explain the benefits of a Return-on-Investment structure within an investment center framework.
Explain the benefits of a Residual Income structure within an investment center framework.
Which of the following is not a measure that management can use in evaluating and controlling investment center performance? a.residual income b.negotiated price c.income from operations d.rate of return on investment
Discuss the importance of nonfinancial information in measuring investment-center performance.
The best measure for evaluating the effectiveness of a manger in an investment center would be A. residual income measures B. current ratio measures C. success in meeting budgeted revenues D. success in controlling costs
Calculating return on Investment for an Investment center is defined by the following formula: Multiple Cholce Income/Average invested assets. Contribution margin/Average invested assets. Contribution margin/Ending assets. Net income/Ending assets. Gross profit/Ending assets.