Rebecca is examining a measure of the financial return the human resources department received for its investment in a new performance appraisal system.The new system cost $3,500 and saved more than $5,000 in payroll expenses.Rebecca is examining the ______.
A) economic value added
B) return on investment
C) gain from investment
D) balanced scorecard

Question

Quizplus · Accepted Answer

The scenario describes a calculation of return on investment (ROI), which is the ratio of the net profit gained from an investment to the cost of the investment. In this case, the cost of the investment is $3,500 and the savings are at least $5,000, so the ROI is greater than 1 (i.e. the investment generated more benefits than cost). Economic value added (A) is a measure of shareholder value that takes into account a company's cost of capital. Gain from investment (C) is not a commonly used term in financial analysis. Balanced scorecard (D) is a strategic management tool that measures an organization's performance across multiple dimensions, including financial, customer, internal processes, and learning and growth.

Rebecca Is Examining a Measure of the Financial Return the Human