What is an advantage of the ROI performance measure?
A) It encourages managers to focus on the short run at the expense of the long run.
B) It encourages managers to focus on the relationship among revenues, expenses, and investment.
C) It produces a narrow focus on divisional profitability at the expense of the profitability of the overall firm.
D) It discourages managers from investing in projects that would decrease divisional ROI but increase the profitability of the company as a whole.

Question

Quizplus · Accepted Answer

The advantage of the ROI performance measure is that it encourages managers to focus on the relationship among revenues, expenses, and investment. This allows managers to make informed decisions regarding the allocation of resources and identify areas for improvement in operational efficiency. However, it is important for managers to consider the long-term impact of their decisions and not focus solely on short-term ROI. A narrow focus on divisional profitability can also be a disadvantage if it overlooks the impact on the profitability of the overall firm.

What Is an Advantage of the ROI Performance Measure