When comparing two different investment alternatives,which of the following measures for each alternative would be the best to use?
A) Return on investment
B) Residual income
C) Net income
D) Contribution margin ratio

Question

Quizplus · Accepted Answer

Return on investment (ROI) provides a standardized metric for comparing different investment options. It takes into account both the amount of investment and the profitability generated by the investment, making it a useful measure for decision making. Residual income and net income are useful in assessing an investment's profitability, but they don't consider the amount of investment required. The contribution margin ratio is more useful in assessing a company's profitability and cost structure than in comparing investment alternatives.

When Comparing Two Different Investment Alternatives,which of the Following Measures