Which measure is limited by the fact that it uses accounting income?
A)ROI
B)RI
C)EVA
D)All of the above

Question

Quizplus · Accepted Answer

ROI (Return on Investment), RI (Residual Income), and EVA (Economic Value Added) are all measures of financial performance, and they can all be limited by the fact that they use accounting income. Accounting income is calculated based on Generally Accepted Accounting Principles (GAAP), which can be subject to manipulation and accounting tricks. As a result, these measures can be limited in their ability to capture the true economic value of a company's performance. Therefore, the best choice is D: All of the above, as all three measures can be limited in this way.

Which Measure Is Limited by the Fact That It Uses