Identify a Limitation of Value-Based Planning

question 2

Multiple Choice

Identify a limitation of value-based planning.

• A)It attempts to assess the economic value a given strategy is likely to create by relying on distorted accounting measures.
• B)It is mainly a tool for evaluating strategy alternatives identified and developed through managers' judgments.
• C)It is unable to assess the shareholder value a given strategy is likely to create.
• D)It is unable to provide a basis for comparing the economic returns to be gained from investing in different businesses.

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Definitions:

Activity

Actions taken or work performed, typically aimed at achieving certain goals or objectives.

Profitability

The ability of a business to earn a profit, which is a financial gain that results when the amount of revenue gained from business activities exceeds the expenses, costs, and taxes involved in sustaining the activity.

Asset Management

The practice of strategically managing company or individual assets to increase value and achieve financial objectives.

Return on Assets

A financial ratio that indicates how profitable a company is relative to its total assets, demonstrating the efficiency of management in using assets to generate profit.