Which of the following is an expanded form of calculating return on investment?
A) Profit margin ratio × Asset turnover ratio
B) Net profit ratio × Inventory turnover ratio
C) Gross profit ratio × EVA
D) Asset turnover ratio × Inventory turnover ratio

Question

Quizplus · Accepted Answer

Return on investment (ROI) can be calculated by multiplying the profit margin ratio by the asset turnover ratio. This is an expanded form of the basic ROI formula, which is net income divided by total assets. The profit margin ratio measures the company's profitability as a percentage of sales, while the asset turnover ratio measures the efficiency of the company's use of assets to generate revenue. By multiplying these two ratios, we get a more comprehensive measure of the company's ROI.

Which of the Following Is an Expanded Form of Calculating