With respect to the performance measures return on invested capital (ROIC),return on equity (ROE),and return on assets (ROA),which of the following is most accurate concerning the relative superiority of the three as analytical tools for understanding a company's performance?
A)ROE is better than ROA,which is better than ROIC.
B)ROA is better than ROIC,which is better than ROE.
C)ROIC is better than ROA,which is better than ROE.
D)ROE is better than ROIC,which is better than ROA.

Question

Quizplus · Accepted Answer

ROIC is a better analytical tool for understanding the company’s performance than return on equity (ROE) or return on assets (ROA) because it focuses solely on a company’s operations. Return on equity mixes operating performance with capital structure, making peer group analysis and trend analysis less meaningful.

With Respect to the Performance Measures Return on Invested Capital