Question

Which of the following is a criticism of using ROI as the only performance measure? Multiple...

Which of the following is a criticism of using ROI as the only performance measure?

Multiple Choice

  • It does not factor in the size of the company.

  • It only considers sales revenue and not the related costs.

  • It includes the company's target rate of return in its calculation, which can be subjective.

  • It may incentivize decisions that are beneficial at the division-level, but not necessarily at the overall company-level.

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Answer #1

Option D is correct i.e It may incentivize decisions that are beneficial at the division-level, but not necessarily at the overall company-level.

It does not factor in the size of the company - It do factor as it take total invested assets.

It only considers sales revenue and not the related costs- It do consider related costs as it take Net operating income in its calculations.

It includes the company's target rate of return in its calculation, which can be subjective.- No, it don't include.

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