Consider the following statements about residual income: Residual income incorporates a firm's cost of acquiring investment capital.Residual income is a percentage measure, not a dollar measure.If used correctly, residual income may result in division managers making decisions that are in their own best interest and not in the best interest of the entire firm.Which of the above statements is (are) true?a.1 onlyb. 1 and 2c. 2 and 3d. 1 and 3

Residual income is net income of a company after deducting equity charge from the net income.…

Answered: Consider the following statements about…

19th Edition

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Chapter12: Balanced Scorecard And Other Performance Measures

Section: Chapter Questions

Problem 13MC: Which of the following measures the profitability of a division relative to the size of its...

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Consider the following statements about residual income:

Residual income incorporates a firm's cost of acquiring investment capital.
Residual income is a percentage measure, not a dollar measure.
If used correctly, residual income may result in division managers making decisions that are in their own best interest and not in the best interest of the entire firm.

Which of the above statements is (are) true?

a.1 only

b. 1 and 2

c. 2 and 3

d. 1 and 3

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