Using ending balances for the investment base in computing return on investment (ROI) might encourage managers to acquire assets:
A) early in the year and dispose of assets late in the year.
B) early in the year and dispose of assets early in the year.
C) late in the year and dispose of assets late in the year.
D) late in the year and dispose of assets early in the year.

Question

Quizplus · Accepted Answer

Using ending balances for the investment base in computing ROI might encourage managers to acquire assets early in the year and dispose of assets late in the year. This is because the ending balance of the investment base will be lower if assets are acquired early in the year and disposed of late in the year, which will result in a higher ROI.

Using Ending Balances for the Investment Base in Computing Return