A Company May Prefer to Use Residual Income Over Return

Multiple Choice

A company may prefer to use residual income over return on investment for performance evaluation because ________.

A) residual income is a ratio but return on investment is an absolute figure
B) residual income is more likely to lead to goal congruence than return on investment is
C) residual income is easier to calculate than return on investment
D) residual income considers three elements but return on investment considers only two elements