The following information was extracted from the accounting records of the City of Charlottetown, PEI:

Average assets increased by $100,000
Variable costs increased by $50,000
How much is the current year's return on investment?

Question

The following information was extracted from the accounting records of the City of Charlottetown, PEI:

Average assets increased by $100,000
Variable costs increased by $50,000
How much is the current year's return on investment?

Quizplus · Accepted Answer

The return on investment (ROI) is calculated as net income divided by average assets. An increase in variable costs would reduce net income, and an increase in average assets would increase the denominator, both leading to a lower ROI compared to the prior year.

The Following Information Was Extracted from the Accounting Records of the City