The income amount that is used in the calculation of return on investment is usually
A)earnings before interest and taxes.
B)net income as defined by GAAP.
C)operating cash flows.
D)net operating profit after taxes.

Question

Quizplus · Accepted Answer

The income amount used in the calculation of return on investment is typically net operating profit after taxes (NOPAT), which represents a company's operating income minus income taxes. This metric provides a more accurate measure of a company's profitability than metrics such as earnings before interest and taxes (EBIT) or net income, as it reflects the company's operating performance net of taxes. Operating cash flows can also be used in certain situations, such as when evaluating the return on investment of a capital expenditure project.

The Income Amount That Is Used in the Calculation of Return