ROI is computed by multiplying a margin times turnover as follows: The ROI measure is intended to
Question:
ROI is computed by multiplying a margin times turnover as follows:
The ROI measure is intended to motivate managers to make their divisions lean, efficient, and profitable. However, the exclusive use of ROI may motivate short-sighted decision making.
a. Provide two examples of how the margin component of ROI may be managed for short-term benefit with long-run consequences.
b. Provide two examples of how the turnover component of ROI may be managed for short-term benefit with long-run consequences.
c. How does the balanced scorecard approach reduce the incentive for managers to focus on activities that result in short-term benefits and long-term consequences?
Step by Step Answer:
Managerial Accounting Information For Decisions
ISBN: 9780324222432
4th Edition
Authors: Thomas L. Albright , Robert W. Ingram, John S. Hill