Which of the Following Statements About Return on Investment (ROI)is

question 96

Multiple Choice

Which of the following statements about return on investment (ROI) is false?

• A) ROI equals margin divided by investment turnover.
• B) ROI is used to measure the performance of investment centers.
• C) Seeking to maximize ROI can result in a conflict between the interest of a particular manager and the interest of the business as a whole.
• D) Companies may minimize motivational problems by using original cost instead of book value in the denominator of the ROI formula.

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Definitions:

Fixed Costs

These are business expenses that remain constant regardless of the level of goods or services produced, such as rent, salaries, and insurance premiums.

Average Variable Cost

The total variable costs divided by the quantity of output produced, representing the variable cost per unit.

Marginal Cost

The additional cost incurred by producing one more unit of a good or service.

Fixed Costs

Costs that do not vary with the level of output or production in the short term, such as rent or salaries.