Asked by Brianna Prater on Jul 12, 2024
Verified
Since the sales figure is neutral in the return on investment (ROI)formula ROI = Margin
× Turnover, a change in total sales will not affect ROI.
Return on Investment
A measure of the profitability of an investment, calculated by dividing the net profit by the initial cost of the investment.
Total Sales
The sum of all sales (revenue) generated by a business within a specific period, reflecting the volume or value of all units sold.
- Familiarize oneself with the theory of Return on Investment (ROI) and how its calculation is performed.
Verified Answer
TG
The Galactic ChurroJul 19, 2024
Final Answer :
False
Explanation :
The ROI formula is indeed affected by sales, as ROI is calculated by multiplying the margin (Net Operating Income / Sales) by the turnover (Sales / Average Operating Assets). Changes in sales directly impact both the margin and turnover, thus affecting the ROI.
Learning Objectives
- Familiarize oneself with the theory of Return on Investment (ROI) and how its calculation is performed.