Which of the Following Is True About Return on Investment

question 102

Multiple Choice

Which of the following is true about return on investment (ROI) ?

• A) It is generally used to evaluate the short-term financial performance of profit centers.
• B) Its use can motivate suboptimal decision making on the part of subunit managers.
• C) It is defined as the difference between some measure of "profit" and an imputed charge for use of assets by the subunit whose performance is being evaluated.
• D) When inflation is low, it approximates the amount of economic income that a subunit generates.
• E) It generally cannot be used to compare the financial performance of one unit in an organization to other units in that organization.

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Definitions:

Credit Column

A section in financial accounting records where increases in liabilities, revenues, and equity accounts, and decreases in assets and expenses are recorded.