Which of the following is a disadvantage of a focus on return on investment?
A) It can encourage managers to focus on cost cutting efforts.
B) It can produce a narrow focus on divisional profitability at the expense of profitability for the overall firm.
C) It can encourage managers to cut inventories and reduce overall investment.
D) It can encourage managers to focus on the long run at the expense of the short run.
E) It can accomplish all of these disadvantages.

Question

Quizplus · Accepted Answer

A focus on return on investment can create a narrow focus on divisional profitability, leading managers to prioritize short-term profits for their division rather than the long-term profitability of the entire firm. This can result in sacrificing investments in areas that may not produce immediate returns but are important for long-term success, such as research and development or employee training. Options A, C, and D can also be disadvantages but are not as directly related to a focus on return on investment as option B. Therefore, option B is the best choice.

Which of the Following Is a Disadvantage of a Focus