Which of the following is an appropriate computation for return on investment?
A) Sales divided by total assets
B) Net income divided by total assets
C) Net income divided by sales
D) Sales divided by stockholders' equity

Question

Quizplus · Accepted Answer

Return on investment (ROI) is measured as the net income earned on an investment relative to the amount of capital invested. Therefore, the appropriate computation for ROI is net income divided by total assets. Option B is the only one that calculates ROI in this manner. Option A calculates asset turnover, option C calculates profit margin, and option D calculates return on equity, which are all different financial ratios.

Which of the Following Is an Appropriate Computation for Return