Question

If a division that currently has negative residual income of $200,000 is considering an investment that will reduce this negative amount to $75,000, the investment: Multiple Choice should be pursued because it is attractive from both the divisional and corporate perspectives. should be pursued because it is attractive from the divisional perspective although not from the corporate perspective.

Answer 1

Residual financial gain states to the surplus of revenue earned by the company, prodigious the lowest amount of return. the presentation of the corporate is that the outline of the division / local performance. Once there's a rise within the residual financial gain of the partition, it mechanically reflects within the residual financial gain of the corporate as an entire. within the given case, an asset decreases the adverse residual financial gain, therefore it's useful to each the partition also because the entire firm.