Which of the following statements is true? Suppose a company evaluates divisional performance using both ROI and residual income. The company's minimum required rate of return for the purposes of residual income calculations is 12%. If a division has a residual income of $6,000, then its ROI is less than 12%. If a company contains a number of investment centers of differing sizes, return on investment (ROI) should be used rather than residual income to rank the financial performance of the divisions. ROI and residual income are tools used to evaluate managerial performance in investment centers.
Which of the following statements is true? Suppose a company evaluates divisional performance using both ROI and residual income. The company's minimum required rate of return for the purposes of residual income calculations is 12%. If a division has a residual income of $6,000, then its ROI is less than 12%. If a company contains a number of investment centers of differing sizes, return on investment (ROI) should be used rather than residual income to rank the financial performance of the divisions. ROI and residual income are tools used to evaluate managerial performance in investment centers.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 5PB: Divisional performance analysis and evaluation The vice president of operations of Free Ride Bike...
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Which of the following statements is true?
- Suppose a company evaluates divisional performance using both ROI and residual income. The company's minimum required
rate of return for the purposes of residual income calculations is 12%. If a division has a residual income of $6,000, then its ROI is less than 12%. - If a company contains a number of investment centers of differing sizes,
return on investment (ROI) should be used rather than residual income to rank the financial performance of the divisions. - ROI and residual income are tools used to evaluate managerial performance in investment centers.
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