The manager of a division is displeased with the ROI of the division. What would increase ROI (holding everything else constant)?
A) increasing sales
B) increasing costs
C) increasing investment
D) decreasing operating income

Question

Quizplus · Accepted Answer

Increasing sales revenue will increase the numerator of the ROI formula which is Net Income/Investment. This will result in a higher ROI, as long as investment stays constant (holding everything else constant). Therefore, the best choice is A.

B is incorrect because increasing costs will decrease net income, resulting in a lower ROI.

C is incorrect because increasing investment will increase the denominator of the ROI formula, resulting in a lower ROI.

D is incorrect because decreasing operating income will decrease net income, resulting in a lower ROI.

The Manager of a Division Is Displeased with the ROI