Using beginning balances for the investment base in computing return on investment (ROI) might encourage managers to acquire assets:
A) early in the year and dispose of assets late in the year.
B) early in the year and dispose of assets early in the year.
C) late in the year and dispose of assets late in the year.
D) late in the year and dispose of assets early in the year.

Question

Quizplus · Accepted Answer

Using beginning balances for the investment base can incentivize managers to acquire assets early in the year to maximize the ROI calculation and dispose of them late in the year to avoid affecting the beginning balance for the next period.

Using Beginning Balances for the Investment Base in Computing Return