Consider the following statements:I. Rol may not be fully controllable by the division manager due to the presence of committed costs.
II. ROl tends to emphasize short-run profitability rather than long-run performance.
Which of these statements represents a disadvantage of ROI

A)Only I.
B)Only II.
C)Both I and II.
D)Neither I nor II.

Question

Consider the following statements:I. Rol may not be fully controllable by the division manager due to the presence of committed costs.
II. ROl tends to emphasize short-run profitability rather than long-run performance.
Which of these statements represents a disadvantage of ROI

A)Only I.
B)Only II.
C)Both I and II.
D)Neither I nor II.

Quizplus · Accepted Answer

I is correct because ROI is a short-term measure and does not take into account the long-term effects of an investment. 
II is correct because ROI does not consider the time value of money and assumes that the value of money remains constant over time.

Consider the Following Statements:I