For what purpose do companies calculate residual income?
A) To determine whether decentralization is possible or not
B) To motivate managers through possible termination
C) To evaluate management performance
D) To measure company profits

Question

Quizplus · Accepted Answer

Companies calculate residual income to evaluate management performance by measuring the profits earned beyond the minimum return expected by investors. It is one of the key performance measures used to evaluate the effectiveness of management in creating value for shareholders. Choices A, B, and D are not the primary purpose of calculating residual income.

For What Purpose Do Companies Calculate Residual Income