One approach to measuring the short-term financial performance of a business unit considered an investment center is return on investment (ROI). ROI is expressed as operating income of the investment center:
A) Divided by the current year's capital expenditures plus cost of capital.
B) Minus imputed interest charged for the use of invested capital by the investment center.
C) Divided by fixed assets.
D) Divided by the assets used by the investment center.
E) Minus the asset turnover (AT) of the investment center.

Question

Quizplus · Accepted Answer

Return on Investment (ROI) is calculated by dividing the operating income of the investment center by the assets used by the investment center. This approach provides a measure of how efficiently the investment center is using its assets to generate profits.

One Approach to Measuring the Short-Term Financial Performance of a Business