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AHIP AHM-520 Exam - Topic 5 Question 127 Discussion

The Puma health plan uses return on investment (ROI) and residual income (RI) to measure the performance of its investment centers. Two of these investment centers are identified as X and Y. Investment Center X earns $10,000,000 in operating income on controllable investments of $50,000,000, and it has total revenues of $60,000,000. Investment Center Y earns $2,000,000 in operating income on controllable investments of $8,000,000, and it has total revenues of $10,000,000. Both centers have a minimum required rate of return of 15%.One difference between the RI method and the ROI method is that
A) The RI method demands greater goal congruence from Puma's managers than does the ROI method
B) The RI method favors Puma's small investment centers more than does the ROI method
C) Only RI can lead to decisions that improve Puma's short-term profits at the expense of its long-term objectives
D) Only RI is useful to Puma for comparing investment centers of different sizes

AHIP AHM-520 Exam - Topic 5 Question 127 Discussion

Actual exam question for AHIP's AHM-520 exam
Question #: 127
Topic #: 5
[All AHM-520 Questions]

The Puma health plan uses return on investment (ROI) and residual income (RI) to measure the performance of its investment centers. Two of these investment centers are identified as X and Y. Investment Center X earns $10,000,000 in operating income on controllable investments of $50,000,000, and it has total revenues of $60,000,000. Investment Center Y earns $2,000,000 in operating income on controllable investments of $8,000,000, and it has total revenues of $10,000,000. Both centers have a minimum required rate of return of 15%.

One difference between the RI method and the ROI method is that

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Suggested Answer: A

by Amber at May 30, 2026, 10:57 AM

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Lili
4 days ago
Definitely think A is the right choice here.
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Susana
9 days ago
Wait, so RI can mess with long-term goals? That's surprising!
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Gregg
15 days ago
I disagree, ROI is still super important for all sizes.
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Tayna
20 days ago
RI favors smaller centers, that's true.
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Gennie
25 days ago
I feel like option C could be a trick answer since both methods can impact short-term and long-term decisions, but I can't quite remember the specifics.
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Franklyn
1 month ago
I'm a bit confused about how goal congruence plays into this. Does that mean managers have to align their goals more with RI than ROI?
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Gayla
1 month ago
I think we practiced a question similar to this, and I recall that RI is more focused on the size of the investment centers, which might relate to option B.
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Xenia
1 month ago
I remember discussing how ROI and RI can lead to different managerial decisions, but I'm not sure which option really highlights that difference.
upvoted 0 times
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