Question

Return on investment (ROI) for a firm is _______. a. the firm's total assets multiplied by net profits after taxes b. a measure of the firm's effectiveness in generating profits with the available assets c. the margin of profit earned by the firm inclusive of the taxes payable by the firm d. lower than the previous year if the firm has performed better in the market

Answer 1

Return on investment (ROI) for a firm (B) measures management's overall effectiveness in generating profits with the available assets.

What is the return on investment?

• A ratio between net income and investment is known as return on investment or return on costs.
• A high ROI indicates that the returns on the investment outweigh the costs.
• ROI is used as a performance metric to assess an investment's effectiveness or to compare the effectiveness of multiple distinct investments.

What are profits?

• The difference between an economic entity's revenue from its outputs and the opportunity costs of its inputs is what is known as a profit.
• It is equivalent to total income less total expenses, which includes both direct and indirect expenses.

What are assets?

• Any resource that a company or other economic organization owns or controls is considered an asset in financial accounting.
• Anything that has the potential to provide positive economic value qualifies.
• The ownership value that can be turned into cash is represented by assets.

Therefore, return on investment (ROI) for a firm (B) measures management's overall effectiveness in generating profits with the available assets.

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