Which of the Following Is Not a Disadvantage of the ROI

question 49

Multiple Choice

Which of the following is not a disadvantage of the ROI performance measure?

• A) It encourages managers to focus on the long run rather than the short run.
• B) It discourages managers from investing in projects that would decrease divisional ROI but increase the profitability of the company as a whole.
• C) It encourages myopic behavior.
• D) All of these are disadvantages of the ROI measure.

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Definitions:

Earned Income

Income generated from business activities or services provided, distinguishing it from investment or donated income.

Earned-Income Strategies

Approaches used by non-profits or social enterprises to generate revenue through business activities rather than donations or grants.

Transparency

The practice of openly and honestly disclosing information to stakeholders, promoting trust and accountability.

Contractual Agreements

Legally binding agreements between two or more parties that outline the terms, conditions, and obligations of each party.