Under which of the following circumstances is a return on investment performance measure more likely to be misleading in comparing the performance of several divisions?
A) Inventories are valued on a FIFO costing basis.
B) Long-term assets are stated at current prices rather than at book value.
C) Long-term assets are stated at book value.
D) A division manager is over investing in assets that provide little contribution toward earnings.

Question

Quizplus · Accepted Answer

When long-term assets are stated at book value, it can be misleading to compare divisions with older, lower book value assets, with division with newer, higher book value assets.

Under Which of the Following Circumstances Is a Return on Investment