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Sir, I have some questions.
These are about Residual Income.
1. It ensures that managers will select projects with positive net present values (NPV)
2. It relates the size of the divisions income to the size of the investment
– Why are these sentences wrong?
3. It is directly related to net present value (NPV) – and why is this right?And I’m confused as to the question number 5 of past exam.
Question is
Which of the following factors should NOT be allowed for when comparing the ROCE of the two organisations to assess the efficiency of their management?
and correct answer is Differences in workforce motivation.
I couldn’t understand even I watched your lecture.
Thank you..
I don’t know where you found the first question, but it is only answer 2 that is correct (1 and 3 are not correct).
With regard to your second question, it is up to the management to ensure that the workforce is motivated and therefore it is part of what is being measured when looking at the efficiency of the management (and therefore should not be allowed for).
(I seem to remember this being in the Paper F5 exam – are you sure it was F2? However, the answer is correct 🙂 )
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