_____________ allows managers to focus their attention on maximizing an amount of earnings above a minimum required ROI.
A) Optimization
B) The DuPont model
C) Residual income
D)Transfer pricing

Question

Quizplus · Accepted Answer

Residual income, also known as economic profit, is a measure of profitability that calculates how much income or profit is generated by an investment or project, above the minimum required rate of return. It measures the net income earned by a division or project,after deducting the cost of capital. This concept allows managers to focus on maximizing earnings above the minimum return rate, rather than just maximizing profits. The DuPont model is a financial analysis tool that breaks down return on equity (ROE) into its component parts. Optimization refers to finding the best possible solution among a set of alternatives. Transfer pricing is the price at which goods or services are transferred from one division or subsidiary of a company to another.

_____________ Allows Managers to Focus Their Attention on Maximizing an Amount