Question

A key question to address in calculating ROI is "which assets to include in the asset base." Which of the following assets should generally be included in the asset base for purposes of calculating the ROI of an investment center?

Option 1:
Only current assets

Option 2:
All assets, regardless of type

Option 3:
Only tangible assets

Option 4:
Only intangible assets

Answer 1

To calculate ROI for an investment center, include all assets, whether current, tangible, or intangible, to fully assess the investment's performance.

Step-by-step explanation:

When calculating the Return on Investment (ROI) for an investment center, it is typically most appropriate to include all assets, regardless of type, in the asset base. This approach allows for a comprehensive assessment of the investment's performance. Assets such as current assets, tangible assets like machinery or real estate, and even intangible assets such as intellectual property and goodwill should be considered. This ensures that all resources contributing to the generation of revenue and profits are accounted for when determining the ROI. Including a broad range of assets provides a more accurate measure of the center's efficiency and profitability.