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Residual income is better measure for performance evaluation of an investments center manager than return on investments because The problems associated with measuring the assets base are eliminated Desirable investments decisions will not be neglected by high-return divisions The arguments about the implicit cost of interest are eliminated Only gross book value of assets needs to be calculated

Residual income is better measure for performance evaluation of an investments center manager than return on investments because The problems associated with measuring the assets base are eliminated Desirable investments decisions will not be neglected by high-return divisions The arguments about the implicit cost of interest are eliminated Only gross book value of assets needs to be calculated

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Residual income is better measure for performance evaluation of an investments center manager than return on investments because

  • The problems associated with measuring the assets base are eliminated
  • Desirable investments decisions will not be neglected by high-return divisions
  • The arguments about the implicit cost of interest are eliminated
  • Only gross book value of assets needs to be calculated
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