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What Disadvantage Is There in Using ROI And/or RI as Performance

Question 46

Multiple Choice

What disadvantage is there in using ROI and/or RI as performance measures?


A) A manager's bonus will decrease when ROI decreases.
B) ROI may decrease when business expands if income does not increase in line with the new investment.
C) RI and ROI are both single-period measures.
D) RI is measured in absolute dollars but ROI is in percentages.
E) Imputed costs that are deducted in the RI calculation, are not recognized in accrual accounting, and are therefore not included in the operating figure used in calculating ROI.

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