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Analysis of divisional profitability using the residual income profile: a note on cash flows and rates of growth
Author(s) -
Kousenidis Dimitrios V.,
Negakis Christos I.,
Floropoulos Iordanis N.
Publication year - 1998
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/(sici)1099-1468(199802)19:1<55::aid-mde868>3.0.co;2-o
Subject(s) - cash flow , profitability index , residual , passive income , economics , econometrics , investment (military) , order (exchange) , return on investment , business , finance , mathematics , microeconomics , public economics , gross income , algorithm , tax reform , production (economics) , politics , political science , law , state income tax
The present note expands on the (Frigo and Ciecka (1995)) residual income profile in order to analyze the relationship between residual income ( RI ), return on investment ( ROI ) and cash flows. The results indicate that in addition to the question of whether RI and ROI are useful in divisional performance evaluation, both measures also have an important role to play as a means of approximating actual cash flow. © 1998 John Wiley & Sons, Ltd.