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268 The following statements have been made about the use of ROI in Alder Co.
(1) If a manager’s performance is being evaluated, a portion of head office assets should be included in
the calculation of ROI in Alder Co’s investment centres.
(2) If the performance of the investment centre is being appraised, head office assets, or investment centre assets controlled by head office should not be included in the calculation of ROI.
Which of the above statements is/are correct?
1 only
2 only
Both 1 and 2
Neither 1 nor 2Good day sir, I did this question and chose 2 only but the answer at the back of the kit states that the correct answer is neither 1 nor 2.I want to confirm if the head office assets are to be included in the calculation of ROI since the formula states to include controllable assets.Thank you
In future please state the topic about which you are asking as the heading, rather than just ‘PM question’. The reason is that many students use the search box to look to see if their problem has already been answers, and our answers are provided for the benefit of everyone 🙂
When measuring the performance of the manager, we only take the profits and the assets that are controlled by the manager and do not include those controlled by head office.
When measuring the performance of the division, we take all the net assets whether controlled by the division or by head office.
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