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kuttin kuttin
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3 months ago
You are assigned to a team responsible for evaluating segment managers' performance measures. A team member has indicated that a friend who is a manager at a competitor's company is evaluated using "ROI," but does not know what "ROI" is.

Required:

a.Explain what ROI is and why it is a useful tool in measuring managers' performance.
b.Give an example of when ROI would not be an appropriate performance
measurement.
Textbook 
Managerial Accounting

Managerial Accounting


Edition: 4th
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bryrdanbryrdan
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More solutions for this book are available here
a.Return on investment (ROI) measures the rate of return generated by an investment in
assets. It is calculated by dividing operating income by average operating assets. It is a useful tool in measuring investment managers' performance because it includes a review of both revenue and expenses, with a focus on operating income. It also evaluates how well the assets have been used to generate revenue.

b.ROI would not be appropriate in evaluating a cost center manager's performance
because the manager has no control over revenue or how well assets are used to generate revenue.  ROI is also not appropriate for a profit center manager's performance because the manager has no control over how well the assets are used to generate revenue.

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kuttin Author
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3 months ago
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