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The use of return on investment (ROI) as a performance measure may lead managers to reject a project that would be favorable for the company as a whole.
Return On Investment
A measure used to evaluate the efficiency of an investment or compare the efficiency of several different investments, calculated by dividing the benefit (return) of an investment by the cost of the investment.
Performance Measure
Indicators used to evaluate the efficiency, effectiveness, or success of an organization or individual in achieving objectives.
Project Rejection
The process of declining to move forward with a project after evaluating its feasibility, risks, and potential returns.
- Absorb the functionality and effects of return on investment (ROI) in managerial performance evaluation.
- Comprehend the critical role of opportunity costs in the determination of transfer prices and the evaluation of performance metrics.
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Learning Objectives
- Absorb the functionality and effects of return on investment (ROI) in managerial performance evaluation.
- Comprehend the critical role of opportunity costs in the determination of transfer prices and the evaluation of performance metrics.
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