A shortcoming of return on investment (ROI)is that it may not lead managers to accept good investment opportunities if
A)ROI of the investment is higher than the present ROI of the division.
B)the ROI of the investment is the same as the present ROI of the division.
C)the ROI of the investment is lower than the present ROI of the division.
D)None of the answers is correct.

Question

Quizplus · Accepted Answer

ROI focuses solely on the return generated by an investment in comparison to its cost. The problem with this approach is that it overlooks other factors that can lead to long-term growth and success for a business. If a new investment opportunity has a lower ROI than the existing division, but has the potential to generate significant growth in the future, then rejecting it based solely on ROI would be short-sighted. Therefore, option C is the correct answer as ROI may not lead managers to accept good investment opportunities if the ROI of the investment is lower than the present ROI of the division.

A Shortcoming of Return on Investment (ROI)is That It May