A problem with ratio-based measures is that managers can make decisions that improve divisional income but lower total organizational income.

Question

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Ratio-based measures such as return on investment (ROI) or earnings per share (EPS) focus on divisional income, which may lead managers to make decisions that benefit their division but negatively impact the overall organization's income. This can include reducing investment in certain areas or cutting costs in ways that may ultimately harm the company's long-term success.

A Problem with Ratio-Based Measures Is That Managers Can Make