Posted: May 17th, 2017

Identify the criticisms of using ROI (Return on investment) as the only performance measure.

Identify the criticisms of using ROI (Return on investment) as the only performance measure.

Return on investment (ROI) gives a methodical method for appraise a product line or organization segment. It is a % that can be worn to contrast financial performance from corner to corner products and/or business segments. Criticisms of ROI contain: motivating short-term oriented decision making, managers select to below invest in products with satisfactory ROI’s from the firm’s viewpoint, complexity in matching invested capital with sales and operating earnings, focal point only on financial actions, and ignoring other important components of the value chain