The MAJOR criticism of using return on investment (ROI)for financial control is that it:
A)gives managers an incentive to reject projects with an ROI greater than the company's required rate of return but less than the department's current ROI.
B)usually uses the blended rate of capital as the required rate of return.
C)encourages competition among segment managers.
D)is a measure of overall performance.

Question

Quizplus · Accepted Answer

The major criticism of using ROI for financial control is that it incentivizes managers to reject projects with a high ROI if it falls below the department's current ROI. This may lead to missed opportunities for growth and profitability for the company. Additionally, it may lead to short-term thinking as managers focus on maintaining their current ROI rather than investing in long-term projects with a higher potential return.

The MAJOR Criticism of Using Return on Investment (ROI)for Financial