Asked by Belle Vivero on Jul 05, 2024
Verified
Calculating return on investment for an investment center is defined by the following formula:
A) Contribution margin/Ending assets.
B) Gross profit/Ending assets.
C) Net income/Ending assets.
D) Income/Average invested assets.
E) Contribution margin/Average invested assets.
Return on Investment
A financial metric used to evaluate the efficiency of an investment, calculated by dividing net profit by the cost of the investment.
Ending Assets
The total assets a company reports on its balance sheet at the end of a financial period, reflecting the company's resources and investments.
- Calculate the return on investment (ROI) for investment centers.
Verified Answer
CF
Crystal FisetteJul 12, 2024
Final Answer :
D
Explanation :
Return on investment (ROI) is calculated by dividing the income earned by the investment center by the average invested assets over the same period. "Income" in this context could refer to net income or operating income. Therefore, the formula for ROI is Income/Average invested assets. Choice D is the only option that includes the appropriate formula for calculating ROI.
Learning Objectives
- Calculate the return on investment (ROI) for investment centers.
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