Which of the following is a shortcoming of ROI as a performance measure?
A)ROI can increase without any change in operations because of depreciation.
B)It can encourage some undesirable behavior by managers.
C)Both ROI can increase without any change in operations because of depreciation and it can encourage some undesirable behavior by managers.
D)Neither ROI can increase without any change in operations because of depreciation nor it can encourage some undesirable behavior by managers.

Question

Quizplus · Accepted Answer

ROI can increase without any change in operations because of depreciation, which can result in misleading conclusions about the company's performance. Additionally, managers may take actions like cutting back on discretionary spending to artificially increase ROI, which may not be in the best interest of the company's long-term success. Therefore, both options A and B are valid shortcomings of ROI as a performance measure.

Which of the Following Is a Shortcoming of ROI as a Performance