If managers are evaluated using return on investment, they are often over aggressive of accepting new investments because the investment will provide an increase in net income.

Question

Quizplus · Accepted Answer

Using return on investment (ROI) as a metric can actually make managers more cautious about accepting new investments, as they might be concerned that the new investment could lower the overall ROI if it does not perform as well as existing assets.

If Managers Are Evaluated Using Return on Investment, They Are