Which one of the following is an advantage of both Return on Investment (ROI) an

Question

Which one of the following is an advantage of both Return on Investment (ROI) and Residual income (RI)? They both measure all elements important for measuring short-term financial performance of investment centers: revenues, costs, and investment. They are both very widely used m practice today. They both can use the minimum rate of return to adjust for differences m rtsk across different investment centers They are both comparable to interest rates and to rates of return on alternate investments They can both use a different minimum rate of return tor different types of assets used by an investment center. Consider the following data for thro divisions of a company. X. Y. and Z. The return on Investment (ROI) for Division X is: 8.0%. 12.0%. 20.0%. 25.0%. 40.0%.

Explanation / Answer

13.Answer Option A

14.Return On Investment = Investment Revenue - Investment Cost / Investment Cost

= 252000/ 630000 = 40%= E

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