Residual Income Is a Better Measure for Performance Evaluation of an Investment

Multiple Choice

Residual income is a better measure for performance evaluation of an investment center manager than return on investment because: (CMA adapted)

A) the problems associated with measuring the asset base are eliminated.
B) desirable investment decisions will not be rejected by divisions that already have a high ROI.
C) only the gross book value of assets needs to be calculated.
D) returns do not increase as assets are depreciateD.
Residual income indicates those situations with more than a threshold return that should be accepteD.