Asked by

Derrick Warren
on Dec 05, 2024

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The advantage of residual income as a measure of investment centre performance is:

A) it can be used to compare investment centres of different sizes.
B) it focuses on long-term performance.
C) it includes the organisation's minimum required rate of return.
D) it can be used to compare investment centres of different sizes AND it includes the organisation's minimum required rate of return.

Residual Income

A measure of performance and profitability calculated as the net operating income after deducting a charge for the cost of capital.

Investment Centre Performance

An evaluation of a business unit's profitability and efficiency in managing its assets to generate profits.

Organisation's Minimum Required Rate Of Return

The lowest acceptable return on investment that an organization deems necessary, reflecting its risk tolerance and financial objectives.

  • Recognize the advantages of using residual income over other performance measures.
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Leonarda DaudiDec 09, 2024
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