Which of the Following Is Not a Criticism of Using

question 52

Multiple Choice

Which of the following is not a criticism of using return on investment (ROI) for divisional performance evaluation?

• A) ROI may not capture and reflect value creation in the "new economy."
• B) ROI does not take into consideration the amount of capital invested in the division whose performance is being evaluated.
• C) The ROI metric has a short-term focus/orientation.
• D) ROI fails to capture broader elements of "performance," beyond financial performance.
• E) There is a disconnect between models used for the analysis of long-term capital investment projects and subsequent evaluation of the financial results of those projects using ROI.

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Definitions:

Differential Effect

The financial impact of choosing one option over another in decision-making scenarios, focusing on differences in costs and benefits.

Variable Selling Cost

Selling costs that vary directly with the volume of sales, such as commissions or shipping fees.

Make-Or-Buy Decision

A decision-making process used by companies to determine whether to produce a product in-house or purchase it from an external supplier.

Cost Savings

The reduction in expenses achieved through efficiencies, economies of scale, negotiations, or eliminating unnecessary expenses.