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When a Company Is Comparing the Financial Performance of Various

question 163

True/False

When a company is comparing the financial performance of various divisions, it may choose to focus on RI as opposed to ROI because using RI tends to lead toward goal congruence between the division and the corporation.


Definitions:

Calendar Time

The concept of time as measured by calendar units, such as days, months, and years, used in planning and scheduling.

Long Run

An economic phase where all elements of production and expenses can fluctuate, enabling complete adaptation to any alterations.

Normal Profit

The minimum profit necessary for a company to remain competitive in the market, equating to the opportunity cost of capital and resources.

Implicit Costs

Indirect expenses that do not involve a direct cash outlay but represent an opportunity cost, such as using resources for one purpose over another.

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