The rate of return on investment (ROI)has two components:
A)Profit margin percentage and investment turnover ratio.
B)Sales margin percentage and investment turnover ratio.
C)Profit margin percentage and accounts receivable turnover ratio.
D)Sales margin percentage and accounts receivable turnover ratio.

Question

Quizplus · Accepted Answer

The rate of return on investment (ROI) is calculated by multiplying the profit margin percentage by the investment turnover ratio. The profit margin percentage is the percentage of profit that is earned on each dollar of sales, while the investment turnover ratio is the number of times that the investment is turned over in a given period. Therefore, both components of ROI are necessary to calculate the overall rate of return on investment. Option A correctly includes both components, while options B, C, and D do not.

The Rate of Return on Investment (ROI)has Two Components