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What is a weakness of residual income? ...

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Accounting

What is a weakness of residual income?

  • A.

    It encourages managers to make investment decisions that are more consistent with the interests of the company as a whole.

  • B.

    It does not take cost of capital into consideration.

  • C.

    It can be misleading when comparing divisions of different sizes.

  • D.

    It routinely results in managers rejecting investment opportunities that would be advantageous to the company as a whole.

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