ROI

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November 24, 2017 at 12:15 pm #417807
adarsh1997
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Which of the following is a valid reason for choosing RI and not ROI?

a. ROI requires an estimate of cost of capital.
b. ROI can overemphasise short term performance at the expense of the long term performance.

c. ROI is a relative measure, therefore small investment with a high rate of return, may appear preferable to a large division with a lower ROI.

1. The answer is C.
2. Could you explain why the answer could not be B?
November 24, 2017 at 4:57 pm #417845
John Moffat
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Because the same applies to RI as well, and it is not therefore a reason for preferring ROI.
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