Which One of the Following Is Not a Limitation Shared

question 127

Multiple Choice

Which one of the following is not a limitation shared by residual income (RI) and return on investment (ROI) divisional performance measures?

• A) They are both short-term performance indicators.
• B) They both may fail to capture significant value-creating activities of the organization.
• C) They are both subject to short-term manipulation on the part of divisional managers.
• D) Both are subject to a number of measurement issues that complicate their use in practice.
• E) They both relate, in percentage terms, earnings to the level of investment in each division.

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Definitions:

Units Of Time

Standardized segments of time used for measuring duration, such as seconds, minutes, hours, days, months, and years.

Double-Declining-Balance Method

A method of accelerated depreciation where an asset's book value is reduced by twice the straight-line depreciation rate.

Depreciation Record

Depreciation Record is a detailed account of the depreciation amounts allocated over the life of an asset, which impacts the value of the asset on the balance sheet and the depreciation expense on the income statement.