As Return on Investment Is a Short-Term Performance Measure

question 14

Multiple Choice

As return on investment is a short-term performance measure:

• A)there is a need to combine it with long-term measures when assessing performance.
• B)it cannot be manipulated by managers for their own benefit
• C)it is useful for comparing divisions of different sizes
• D)none of the options is true

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Definitions:

Double Declining-balance

An accelerated depreciation method that counts the expense twice as fast as the straight-line method, reducing the value of an asset more quickly.

Net Income

The amount of profit left after all expenses, taxes, and costs are subtracted from a company’s total revenue; synonymous with net profit.

Tax Purposes

Describes the reasoning or intention behind financial decisions or calculations made to comply with tax laws and regulations.

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life, reflecting its consumption or loss of value over time.