Which of the following statement(s) is/are not true? i. Return On Investment (ROI) as a performance measure may discourage managers of divisions with high ROIs to invest in projects with lower ROIs that are acceptable to the organization as a whole. ii. ROI incorporates the firm’s opportunity cost of acquiring investment capital. iii. Under Residual Income (RI), rates of return can be adjusted to take into account differences in risks for different investment assets. iv. Both ROI and RI use a percentage measure. v. ROIs cannot be used to compare divisions of differing sizes. Multiple Choice a)i, ii and iii b)ii, iv and v c)i only d)i and ii e)ii, iii and iv

Which of the following statement(s) is/are not true? i. Return On Investment (ROI) as a performance measure may discourage managers of divisions with high ROIs to invest in projects with lower ROIs that are acceptable to the organization as a whole. ii. ROI incorporates the firm’s opportunity cost of acquiring investment capital. iii. Under Residual Income (RI), rates of return can be adjusted to take into account differences in risks for different investment assets. iv. Both ROI and RI use a percentage measure. v. ROIs cannot be used to compare divisions of differing sizes. Multiple Choice a)i, ii and iii b)ii, iv and v c)i only d)i and ii e)ii, iii and iv

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 7DQ: (a) Explain how return on investment might lead a divisional manager to reject new investments that...

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