Most Accounting Measures of Divisional Performance Have a Common Limitation

question 75

Multiple Choice

Most accounting measures of divisional performance have a common limitation in that they

• A) have a short-term bias.
• B) are costly to implement.
• C) are difficult to interpret.
• D) have a long-term bias.

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Definitions:

Revenue Recognized

Income that a company has earned and reported in its financial statements for a specific period, following accounting principles.

Trading Investments

Securities that are purchased by a firm for the purpose of realizing a short-term profit.

Long-Term Trading Investments

Investments in stocks, bonds, or other securities that a company intends to hold for a period longer than a year to achieve long-term financial goals.

Strategic Investments

Investments made to gain a competitive advantage or achieve long-term goals rather than for short-term profit.