Which of the following can increase a company's return on investment?
A)decrease in operating income
B)decrease in total assets
C)decrease in assets turnover ratio
D)decrease in residual income

Question

Quizplus · Accepted Answer

Decreasing total assets will result in a higher return on investment (ROI) calculation, as ROI is calculated by dividing net income by total assets. If the denominator (total assets) decreases, the resultant ratio will be higher.

Therefore, decreasing operating income (A) or assets turnover ratio (C) will result in a lower ROI, and decreasing residual income (D) alone will not necessarily increase ROI.

Which of the Following Can Increase a Company's Return on Investment