When evaluating managerial actions, which of the following alternate measures overcomes many of the problems with ROI?
A)Residual income and asset turnover
B)EVA and flexible budgets
C)Residual Income and EVA
D)Asset turnover and EVA

Question

Quizplus · Accepted Answer

Residual income and EVA both account for the cost of capital, which ROI does not. Additionally, residual income uses a specific target rate of return to evaluate performance, while EVA uses a company's overall cost of capital. Both measures provide a more accurate picture of a manager's effectiveness in generating profit above and beyond the cost of capital.

When Evaluating Managerial Actions, Which of the Following Alternate Measures