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

Question

Quizplus · Accepted Answer

Economic profit or EVA takes into account the cost of capital and provides a more accurate measure of the value created by an investment than ROI. This can lead to better investment decisions and encourage managers to prioritize projects that will generate long-term value for the company. In contrast, ROI only considers the profitability of a project without considering the cost of capital, which can lead to decisions that are not optimal for the company's long-term success. Therefore, the use of economic profit or EVA promotes goal congruence and better investment decisions than the use of ROI.

In General,use of Economic Profit or EVA Will Promote Goal