Return on Investment (ROI), Though Widely Used, Is Subject to Which

question 56

Multiple Choice

Return on Investment (ROI) , though widely used, is subject to which one of the following limitations?

• A) ROI cannot incorporate differences in risk across different divisions.
• B) ROI ignores the amount of capital invested in a division.
• C) ROI may not capture value-creation for firms operating in capital-intensive industries.
• D) ROI may motivate managers to take suboptimal decisions from the standpoint of the organization as a whole.
• E) ROI cannot be used to judge the performance of units of different size.

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Definitions:

Wavelength

The distance between successive crests of a wave, specifically in physics, the distance between identical points in adjacent cycles of a wave.

Orbital

A mathematical function describing the location and wave-like behavior of an electron or pair of electrons in an atom.

Electron

A subatomic particle with a negative charge, orbiting the nucleus of an atom and involved in chemical bonds and electricity.

S Orbital

A type of atomic orbital that is spherical in shape, representing the probability distribution of an electron.