In general, use of economic profit or EVA will promote goal congruence and lead to better decisions than use of ROI.

Question

Quizplus · Accepted Answer

Economic profit or EVA takes into account the opportunity cost of capital and considers the time value of money, providing a more accurate picture of a firm's profitability and incentivizing managers to make long-term value-creating decisions. On the other hand, ROI may encourage short-term decisions that may not be in the best interest of the firm's long-term sustainability. Therefore, the use of economic profit or EVA is generally preferred over ROI.

In General, Use of Economic Profit or EVA Will Promote