Performance measurement

This topic has 4 replies, 2 voices, and was last updated 4 years ago by John Moffat.

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July 30, 2021 at 3:41 am #629811

johnbriane
Member

Sir

Are both return on investment and residual income based on accounting measures of profit and capital employed which may be subject to manipulation

Or is it only based on residual income ?

And this is a disadvantage isn’t it sir

July 30, 2021 at 10:10 am #629841

John Moffat
Keymaster

They are both subject to manipulation and it is a problem with both measures.

July 30, 2021 at 1:23 pm #629859

johnbriane
Member

Ok sir
So it’s a disadvantage of both ri and Roi
Thank you sir

July 30, 2021 at 1:24 pm #629860

johnbriane
Member

But why Is it open to manipulation Sir

July 30, 2021 at 2:20 pm #629865

John Moffat
Keymaster

Because profits can be manipulated by things like deciding what rate of depreciation to charge and what to accrue and prepay.
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