Which of the following is an advantage of the ROI performance measure?
A)It encourages excessive investment in operating assets.
B)It encourages managers to keep the fixed assets that the division already owns.
C)It encourages myopic behaviour.
D)It encourages cost efficiency.

Question

Quizplus · Accepted Answer

ROI encourages cost efficiency as it measures the return on investment relative to the cost of investment. This motivates managers to use assets effectively and avoid unnecessary expenses, which leads to cost efficiency. A, B, and C are disadvantages of ROI, not advantages.

Which of the Following Is an Advantage of the ROI