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ROI has a disadvantage that use of a percentage comparisons may be misleading.
Tutor can you explain this disadvantage?
A new investment increase RI but decrease ROI. Can you please explain it breifly tutor?
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.