Answer: a. Residual income, like ROI, can encourage a short run orientation
Explanation:
Residual incomes presents the same problem as ROI measurement, The problem of myopic behaviour or short run orientation
The manager may cut expenses like advertising expenses, maintenance expenses , training expenses when being evaluated under residual income or ROI to reflect a favourable residual income or return on investments, The problem Managers being short run orientated is not eliminated or minimized by change methods between ROI and Residual income.
