Managerial performance can be measured in many different ways including return on investment (ROI) and residual income. A good reason for using residual income instead of ROI is that:
A) residual income can be computed without regard to identifying an investment base.
B) appropriate goal congruence behavior is more likely to occur when using residual income.
C) residual income is well accepted in many organizations and often used in the financial press.
D) ROI does not take into consideration both the investment turnover ratio and return-on-sales percentage.

Question

Quizplus · Accepted Answer

Residual income encourages managers to make decisions that are in line with the overall goals of the organization, promoting goal congruence, as it considers the cost of capital and motivates managers to pursue projects that exceed this cost.

Managerial Performance Can Be Measured in Many Different Ways Including