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ROI

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › ROI

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • November 22, 2021 at 4:48 pm #641334
    James124
    Participant
    • Topics: 159
    • Replies: 136
    • ☆☆☆

    Quwstion 1;
    ROI has a disadvantage that use of a percentage comparisons may be misleading.
    Tutor can you explain this disadvantage?

    Question 2:
    A new investment increase RI but decrease ROI. Can you please explain it breifly tutor?

    November 23, 2021 at 8:50 am #641361
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51560
    • ☆☆☆☆☆

    Q1 A % increase of profit of a big division already making a big profit will mean much more extra profit than the same % of the profit of a small division that is currently making a much smaller profit.

    Q2 This can be the case but does not have to be the case. Because they are two different approaches they do not have to give the same results.

    If you watch the Paper PM lectures on divisional performance (it is for Paper PM that these points become more relevant) then I illustrate both points with examples.

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