Which of the following descriptions of the residual operating income (ROPI) model is inaccurate? A) ROPI analysis focuses on the amount by which shareholder value is created during a period. B) ROPI is positive when NOPAT is higher than WACC × NOA_Beg. C) ROPI is useful as a management tool as it forces managers to pay attention to both the income statement and the balance sheet. D) One critique of the ROPI model is that it focuses managers' attention solely on short-term operating assets and neglects investment in long-term operating assets. E) None of the above

Question

Quizplus · Accepted Answer

The critique mentioned in D is inaccurate because the Residual Operating Income (ROPI) model does not solely focus on short-term operating assets; it considers long-term operating assets as well by evaluating the performance over the cost of the entire capital employed, not just short-term assets.

Which of the Following Descriptions of the Residual Operating Income