Which One of the Following Statements Pertaining to the Return

question 15

Multiple Choice

Which one of the following statements pertaining to the return on investment (ROI) as a performance measure is incorrect?

• A) When average age of assets differs substantially across segments of a business, the use of ROI may not be appropriate.
• B) ROI relies on financial measures that are capable of being independently verified while other forms of performance measures are subject to manipulation.
• C) The use of ROI may lead managers to reject capital investment projects that can be justified using discounted cash flow (DCF) decision models.
• D) The use of ROI can make it undesirable for a skillful manager to take on trouble-shooting assignments such as those involving turning around unprofitable divisions.
• E) The use of ROI can lead managers to emphasize the ROI of a division over the profitability of the parent organization.

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