Which of the following is the correct formula for calculating return on investment?
A) Net profit / Sales
B) Gross profit / Sales
C) Operating income / Average total assets
D) Earnings available to stockholders / Number of outstanding shares of stock

Question

Quizplus · Accepted Answer

Return on investment (ROI) is calculated by dividing operating income by average total assets. This formula is used to determine how effectively a company is utilizing its assets to generate profits. It is a more comprehensive measure of profitability than simply looking at net profit or gross profit. Choice A is incorrect because it only considers the profitability of sales and does not take into account expenses. Choice B is also incorrect because it only considers gross profit, which does not account for operating expenses. Choice D is incorrect because it only considers earnings per share and does not take into account the total amount of assets used to generate those earnings.

Which of the Following Is the Correct Formula for Calculating