3 in what way can the use of a roi as a performance

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3. In what way can the use of a ROI as a performance measure for investment centers lead to bad decisions? How does the Residual Income Approach overcome these problems? (25 points) The ROI allows for a manager of a n investment center to reject a profitable income if its rate of return exceeds the company’s required rate but is also lower than the rate of the investment centers current ROI. The RI approach overcomes this problem by increasing the residual income anytime a project exceeds the required rate of return. 4. Why does the Balanced Scorecard include financial performance measures, as well as measures of how internal business processes are doing? (25 points) The balanced scorecard is used to support a company’s strategy (actions that will further company goals). If the company had financial goals then measures of finical performance
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Pearson 3 must be included in the balanced scorecard. If internal business processes are improving, but financial outcomes aren’t then it shows that the company’s strategies aren’t working and they need to revise them in order to see the changes they want.
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