Asked by Ujjwal Dhakal on Jul 26, 2024
Verified
Return on investment can provide information as to the benefits that managers can obtain by reducing their investments in current and fixed assets.
Current Assets
Assets that are expected to be converted into cash, sold, or consumed within a year or the business cycle, whichever is longer.
Fixed Assets
Long-term tangible assets used in the operation of a business and not expected to be converted into cash within a year.
Return on Investment
measures the gain or loss generated from an investment relative to its cost, providing insight into the efficiency of the investment.
- Comprehend the principle of Return on Investment (ROI) and the methodology by which it is determined.
- Analyze the impact of decision-making on ROI and residual income.
Verified Answer
MC
megan coutsJul 30, 2024
Final Answer :
True
Explanation :
Return on investment (ROI) is calculated by dividing net operating income by average operating assets, indicating how efficiently a company uses its assets to generate profits. Reducing investments in current and fixed assets can improve ROI if it leads to more efficient asset use without negatively impacting income.
Learning Objectives
- Comprehend the principle of Return on Investment (ROI) and the methodology by which it is determined.
- Analyze the impact of decision-making on ROI and residual income.