3.In what way can the use of a ROI as a performance measure for investment centerslead to bad decisions? How does the Residual Income Approach overcome theseproblems? (25 points) Show
Get answer to your question and much more 4.Why does the Balanced Scorecard include financial performance measures, as wellas measures of how internal business processes are doing? (25 points) Get answer to your question and much more This preview shows page 1 out of 1 page. In what way can the use of ROI as a performance measure for investment centers lead to baddecisions? How does the residual income approach overcome this problem? Get answer to your question and much more End of preview. Want to read the entire page? Upload your study docs or become a Course Hero member to access this document Recommended textbook solutions Intermediate Accounting14th EditionDonald E. Kieso, Jerry J. Weygandt, Terry D. Warfield 1,471 solutions
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Fundamentals of Financial Management14th EditionEugene F. Brigham, Joel F Houston 845 solutions Financial Accounting4th EditionDon Herrmann, J. David Spiceland, Wayne Thomas 1,097 solutions In what way can the use of ROI as a performance measures for investment Centres lead bad decisions How does the residual income approach overcome this problem?Using ROI to evaluate performance can lead to bad decisions because if a manager of an investment center were to reject a profitable investment opportunity whose rate of return exceeds the company's required rate of return but whose rate of return is less than the investment center's current ROI.
In what way can the use of ROI as a performance measure for investment centers?Return on investment (ROI) is a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment's cost.
Why does the balanced scorecard include financial performance measures as well as measures of how well internal processes are doing?The measurement taken by a balanced scorecard helps the company to improve, innovate. The main reason to include financial performance is how efficient the process is working. Financial performance shows the condition of a company.
What is meant by the terms margin and turnover in ROI calculations what is meant by residual income?What is meant by the terms margin and turnover in ROI calculations? Margin is net operating income divided by sales, and is ordinarily improved by increasing selling price, reducing operating expenses, or increasing unit sales. Turnover is sales divided by average operating assets.
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In what way can the use of ROI as a performance measure for investment Centres lead to bad decisions How does the residual income approach overcome this problem?
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