When comparing two different investment alternatives of different sizes, which of the following measures for each alternative would be the best to use?
A) Return on investment
B) Residual income
C) Net income
D) Contribution margin ratio

Question

Quizplus · Accepted Answer

Return on investment is the best measure to use when comparing two different investment alternatives of different sizes as it provides a percentage return on the amount invested, allowing for an apples-to-apples comparison regardless of the size of the investment. Residual income, net income, and contribution margin ratio do not take into consideration the amount invested and may lead to inaccurate comparisons.

When Comparing Two Different Investment Alternatives of Different Sizes, Which