Question

Department A shows an annual after-tax profit of $400,000 from invested assets of $12 million. Department B shows an annual after-tax profit of $400,000 from invested assets of $8 million. Which unit had the best financial performance?A) Department A performed the best.B) Department B performed the best.C) Both departments had the same financial performance.D) Performance cannot be determined from these statistics.

Answer 1

Answer:

B) Department B performed the best.

Explanation:

Investment assets are those that we use to produce additional income, or with which we speculate on future income.

So, if department B invested less than department A in those assets, and both had the same taxes during the year, department B has better used the assets in its main mode of business and to generate income.