aIf a strategy is not working it should become evident on th

a)If a strategy is not working, it should become evident on the balanced scorecard when some of the predicted effects don\'t occur.

True or False

b)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%.

True or False

Solution

Req a. TRUE.

Req b. False.

Explanation:

ROI is greater than the Minimum target rate of return when there is a positive residual income. Positive residual income itself states that the division has earned actual income more than minimum income.