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roi and ri

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › roi and ri

  • This topic has 1 reply, 2 voices, and was last updated 8 months ago by John Moffat.
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  • October 11, 2021 at 8:10 am #637427
    johnbriane
    • Topics: 146
    • Replies: 147
    • ☆☆☆

    sir i have two questions

    1) does not facilitate easy comparison between divisions of different sizes is an disadvantage of both roi and ri correct ?

    2) based on accounting measures of profit and capital employed which maybe subject to manipulation is also a disadvantage of roi and ri am i correct sir ?

    thank you

    October 11, 2021 at 9:09 am #637437
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49598
    • ☆☆☆☆☆

    1. No. It is a disadvantage of RI because a bigger division is going to have a bigger RI. It is not a disadvantage of ROI because that is calculated as a %.

    2. Yes, that is true.

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