A Problem with Using Residual Income as a Performance Measure

Multiple Choice

A problem with using residual income as a performance measure is that a corporation with a:

A) high investment turnover ratio always has a higher residual income than a corporation with a smaller investment turnover ratio.
B) larger dollar amount of assets is likely to have a higher residual income than a corporation with a smaller dollar amount of assets.
C) high return on sales always has a higher residual income than a corporation with a smaller return on sales.
D) None of these answers are correct.