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Asked by Zybrea Knight on Apr 28, 2024

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By using the return on investment as a divisional performance measure, divisional managers will always be motivated to invest in proposals that will increase the overall return on investment for the company.

Return on Investment

A measure used to evaluate the efficiency of an investment or to compare the efficiencies of several investments.

Divisional Performance Measure

Metrics or standards used to evaluate the efficiency, profitability, and productivity of a distinct segment or division within a larger company.

Divisional Managers

Individuals responsible for overseeing a specific division within a company, managing its operations, performance, and strategy.

  • Comprehend the assessment of managerial effectiveness and the productivity of departments through financial metrics such as return on investment (ROI).
  • Comprehend the impact of investment choices and profit margins on the general efficacy of responsibility centers.
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Domonique EvansApr 29, 2024
Final Answer :
False
Explanation :
Using return on investment (ROI) as the sole divisional performance measure can sometimes discourage managers from investing in projects that, while potentially profitable and beneficial to the company as a whole, might result in a lower divisional ROI compared to existing projects or the division's current ROI. This can lead to underinvestment in projects that are beneficial but do not meet the division's ROI threshold.

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