The following information is available for the Peppercorn Company:

-An improvement in either capital turnover or income percentage of revenue , without changing the other, will also improve the
A) residual income.
B) cost of capital.
C) net book value.
D) rate of return on invested capital.

Question

The following information is available for the Peppercorn Company:
 
-An improvement in either capital turnover or income percentage of revenue , without changing the other, will also improve the
A) residual income. 
B) cost of capital. 
C) net book value. 
D) rate of return on invested capital.

Quizplus · Accepted Answer

Improvements in either capital turnover or income percentage of revenue without changing the other will result in an increase in the rate of return on invested capital (ROIC). This is because both of these factors affect the profitability of the company and its ability to generate returns on its invested capital. Therefore, the correct answer is D.

The Following Information Is Available for the Peppercorn Company