Using residual income as a measure of performance rather than return on investment promotes goal congruence because residual income ________.
A) places importance on the reduction of underperforming assets
B) calculates a percentage return rather than an absolute return
C) concentrates on maximizing an absolute amount of dollars
D) concentrates on maximizing the return on sales

Question

Quizplus · Accepted Answer

Residual income focuses on maximizing an absolute amount of dollars over the cost of capital, aligning managers' objectives with the overall goal of the company to increase net income, thus promoting goal congruence.

Using Residual Income as a Measure of Performance Rather Than