Return on investment (ROI) is a widely used financial metric but suffers from the following weakness:
A) it includes variable costs and excludes fixed costs
B) it omits certain financial measures including sales returns
C) intangible benefits such as innovation are not captured in ROI
D) revenues, expenses and assets are difficult to calculate making ROI subject to error
E) none of the above

Question

Quizplus · Accepted Answer

ROI only focuses on the tangible financial gains and does not take into account the intangible benefits such as innovation, customer satisfaction, and employee morale, that are difficult to quantify but can have a significant impact on the overall success of a business. Therefore, ROI is limited in its ability to fully assess the value of an investment or decision.

Return on Investment (ROI) Is a Widely Used Financial Metric