A limitation of ROI as a measure of performance is that
A)it is a single comprehensive figure examining only one facet of the firm.
B)it provides disincentive to use existing assets efficiently.
C)it provides a disincentive to acquire new assets.
D)it is very sensitive to depreciation policy.
E)it does not provide the basis for common comparison.

Question

Quizplus · Accepted Answer

ROI is calculated by dividing net income by total assets, and since depreciation is subtracted from income it can drastically affect the ROI. Different depreciation policies can result in different ROI values making it difficult to compare performance over time or against competitors.

A Limitation of ROI as a Measure of Performance Is