Return on investment (ROI) for a firm:
A)is the margin of profit earned by the firm inclusive of the taxes payable by the firm.
B)is its total assets multiplied by net profits after taxes.
C)measures management's overall effectiveness in generating profits with the available assets.
D)will be lower than the previous year if the firm performs better in the market.

Question

Quizplus · Accepted Answer

ROI measures how well a firm generates profits with the assets it has. It is calculated by taking the net profit of the firm and dividing it by the total assets. Therefore, Option C is the correct answer. Option A is incorrect since ROI does not consider taxes payable by the firm. Option B is incorrect since it suggests that ROI is a product of total assets and net profits after taxes, which is incorrect as ROI is calculated by dividing net profit by total assets. Option D is incorrect since ROI increases if a firm performs better in the market.

Return on Investment (ROI) for a Firm