A company that has a profit can increase its return on investment by:
A) increasing sales revenue and operating expenses by the same dollar amount.
B) increasing average operating assets and operating expenses by the same dollar amount.
C) increasing sales revenue and operating expenses by the same percentage.
D) decreasing average operating assets and sales by the same percentage.

Question

Quizplus · Accepted Answer

Increasing sales revenue and operating expenses by the same percentage will maintain the same profit margin while increasing the amount of profit earned. This will increase the return on investment. Both A and B do not result in an increase in return on investment. D decreases both the numerator and denominator of the return on investment formula, resulting in an unclear effect on the return on investment.

A Company That Has a Profit Can Increase Its Return