The conventional return on investment (ROI) performance measure calculates "profit" and "investment" based on:
A) American Accounting Association (AAA) recommendations.
B) U.S. Generally Accepted Accounting Principles (GAAP).
C) The American Institute of Certified Public Accountants (AICPA) regulations.
D) The legal and business professions' practices.
E) Requirements specified by the U.S. Securities and Exchange Commission (SEC).

Question

Quizplus · Accepted Answer

The conventional ROI performance measure is based on U.S. Generally Accepted Accounting Principles (GAAP), which provide guidelines for financial reporting and accounting practices in the United States. This measure calculates profitability by dividing net income by total assets, and it is widely used by managers, investors, and analysts to assess a company's financial performance. While other organizations such as the AAA, AICPA, and SEC may provide additional guidance, the basis for the conventional ROI measure is rooted in GAAP.

The Conventional Return on Investment (ROI) Performance Measure Calculates "Profit