Which of the Following Is a Shortcoming of ROI as a Performance

question 194

Multiple Choice

Which of the following is a shortcoming of ROI as a performance measure?

• A)ROI can increase without any change in operations because of depreciation.
• B)It can encourage some undesirable behavior by managers.
• C)Both ROI can increase without any change in operations because of depreciation and it can encourage some undesirable behavior by managers.
• D)Neither ROI can increase without any change in operations because of depreciation nor it can encourage some undesirable behavior by managers.

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Definitions:

Average-Cost Method

An inventory costing method that calculates the cost of goods sold and ending inventory value based on the weighted-average cost of all items.

Inventory Turnover

A ratio that shows how quickly a company's inventory is sold and replaced over a specific period, indicating the efficiency of inventory management.

Merchandisers

Businesses that purchase goods for resale to consumers, playing a vital role in the retail industry by moving products from manufacturers to the market.

Wholesalers

Businesses that purchase goods in large quantities from producers to resell them to retailers or other businesses.