A Disadvantage of Using ROI to Evaluate Performance Is That

question 103

True/False

A disadvantage of using ROI to evaluate performance is that it encourages the manager to reduce the investment in operating assets as well as increase net operating income.

---

Definitions:

Sales Revenue

The income received from selling goods or services over a period of time.

Budgeted Sales Revenue

Projected income from sales over a certain period, used for planning and forecasting operations.

Sales Increase

A rise in the volume or value of products or services a business has sold within a specific period.

Ending Inventory

The total value of goods available for sale at the end of an accounting period.