Which of the following statements regarding ROI computations istrue?
A) Net income after interest and taxes is most frequently used as the measure of income in the ROI formula.
B) The fair market value of assets without regard to depreciation is used as a measure of operating assets in the ROI formula.
C) Assets used in the ROI formula are generally measured as an average of beginning and end of period numbers.
D) All assets, including those that are idle or held for resale, are included in the ROI formula.

Question

Quizplus · Accepted Answer

Assets used in the ROI formula are generally measured as an average of beginning and end of period numbers. This is done to avoid distortions that may occur if only one period's numbers were used. Option A is incorrect because net income after interest and taxes is not frequently used as a measure of income in the ROI formula; rather, the operating income is used as it reflects the true economic profitability of the assets. Option B is incorrect because the measure of operating assets is usually the net book value, which takes into account depreciation. Option D is incorrect because only assets that are used in the operations are included in the ROI formula, not those that are held for resale or are idle.

Which of the Following Statements Regarding ROI Computations Istrue