The Major Criticism of Using Return on Investment (ROI) for Evaluating

question 115

Multiple Choice

The major criticism of using return on investment (ROI) for evaluating the financial performance of business units considered investment centers is that ROI:

• A) Gives managers of profitable business units an incentive to reject some projects that would benefit the organization as a whole.
• B) Is not easily understood by managers.
• C) Usually uses a blended rate of capital as the required rate of return.
• D) Has a long-term (strategic) focus and therefore is not useful in terms of evaluating short-term performance.
• E) Favors large units (investment centers).

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Definitions:

Old Saint Peter's

A basilica that once stood on the spot where the Basilica of Saint Peter in Vatican City is located today, originally constructed during the 4th century.

San Vitale

An important early Christian Byzantine basilica in Ravenna, Italy, known for its rich mosaics and significance in the development of Byzantine architecture.

Palatine Chapel

A historic chapel in Aachen, Germany, serving as a part of the Aachen Cathedral and notable for its Carolingian architecture.

Artistic Tradition

The transmission of customs, styles, and techniques within art from generation to generation, often within a specific culture or community.