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Your Financial Management lecturer made the following statement: “The annual re...
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Your Financial Management lecturer made the following statement: “The annual return on an investment should not be used as overall objective to be pursued by a business”. He then presented the following few reasons to support this statement and asked you to
(a) Measures focussing on annual accounting and financial indicators ignore risk.
(b) No distinction is made between cash flows generated and profit earned.
(c) Returns on the short-term are encouraged at the expense of the long-term development or the business.
(d) Measures focussing on annual accounting and
financial indicators cannot be manipulated.