Which one of the following will not increase return on investment?
A) Variable costs are increased
B) An increase in sales
C) Average operating assets are decreased
D) Variable costs are decreased

Question

Quizplus · Accepted Answer

Increasing variable costs will decrease the profit margin and hence reduce the return on investment. The other three options will increase profits and ROI: an increase in sales will increase revenue and hence profits, a decrease in average operating assets will reduce the denominator in the ROI formula (net income / average operating assets) and hence increase ROI, and a decrease in variable costs will increase the profit margin and hence increase ROI.

Which One of the Following Will Not Increase Return on Investment