Managerial performance can be measured in many different ways including return on investment (ROI) and residual income. A good reason for using residual income instead of ROI is that:
A. residual income can be computed without regard to identifying an investment base.
B. residual income is well accepted in many organizations and often used in the financial press.
C. appropriate goal congruence behavior is more likely to occur when using residual income.
D. ROI does not take into consideration both the investment turnover ratio and return-on-sales percentage.
Answer: C
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