Which of the following is not a disadvantage of the ROI performance measure?
A) It encourages managers to focus on the long run rather than the short run.
B) It discourages managers from investing in projects that would decrease divisional ROI but increase the profitability of the company as a whole.
C) It encourages myopic behavior.
D) All of these are disadvantages of the ROI measure.

Question

Quizplus · Accepted Answer

A is not a disadvantage but rather an advantage of the ROI performance measure, as it encourages managers to focus on the long run rather than short-term gains. B and C are both disadvantages of the ROI measure, as it can lead to a focus on divisional performance rather than overall company profitability and can encourage short-term thinking. D is incorrect as only two out of the three options listed are actual disadvantages.

Which of the Following Is Not a Disadvantage of the ROI