When a Company Uses Return on Investment as a Performance

question 9

Multiple Choice

When a company uses return on investment as a performance metric,managers have an incentive to invest only in projects ________.

• A) that increase the return on investment of the segment or division
• B) that decrease the return on investment of the segment or division
• C) that have a return on investment that exceeds the cost of capital of the segment or division
• D) that have a return on investment that is less than the cost of capital of the segment or division

---

Definitions:

Nominal GDP

The gross domestic product measured at current market prices, without taking inflation into account.

GDP Price Index

The GDP Price Index measures the overall change in the prices of all goods and services included in the Gross Domestic Product, showcasing inflation or deflation.

Real GDP

The total value of all goods and services produced in a country adjusted for inflation, reflecting the actual economic growth.

Inventory Decreases

A reduction in the quantity of goods that a company has in stock, typically indicating increased sales or reduced production.