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The Use of Return on Investment as a Performance Measure

question 91

True/False

The use of return on investment as a performance measure may lead managers to make decisions that are not in the best interests of the company as a whole.


Definitions:

Forward Rate

An agreed-upon price for a financial transaction that will occur at a future date.

Zero-Coupon Bonds

Debt securities that are sold at a deep discount and do not pay periodic interest payments, but instead are redeemed at their face value at maturity.

Yields to Maturity

The total return anticipated on a bond if it is held until it matures, considering all interest payments and the principal repayment.

Yield to Maturity

The total return anticipated on a bond if the bond is held until it matures, considering both the interest payments received and any gain or loss if the bond is purchased at a discount or premium.

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