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D. netting agreement
Answer: C
NEW QUESTION: 2
The Puma health plan uses return on investment (ROI) and residual income (RI) to measure the performance of its investment centers. Two of these investment centers are identified as X and Y.
Investment Center X earns $10,000,000 in operating income on controllable investments of $50,000,000, and it has total revenues of $60,000,000. Investment Center Y earns $2,000,000 in operating income on controllable investments of $8,000,000, and it has total revenues of $10,000,000. Both centers have a minimum required rate of return of 15%.
One difference between the RI method and the ROI method is that
A. Only RI is useful to Puma for comparing investment centers of different sizes
B. The RI method favors Puma's small investment centers more than does the ROI method
C. The RI method demands greater goal congruence from Puma's managers than does the ROI method
D. Only RI can lead to decisions that improve Puma's short-term profits at the expense of its long-term objectives
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