Question

The return on investment measure of performance is calculated using which of the following?

1) Net income as the amount of return
2) Dividends paid to the entity's assets
3) Average assets for a period divided by net income for the period
4) The amount of net income is more important than the return on investment measure

Answer 1

The return on investment measure of performance is calculated using the formula: Return on Investment (ROI) = Net Income / Average Assets.

Step-by-step explanation:

The return on investment measure of performance is calculated using the formula:

Return on Investment (ROI) = Net Income / Average Assets

This formula calculates the percentage of net income generated by an entity compared to its average assets. It provides insight into the effectiveness of an investment by showing how efficiently the assets are generating profit. Dividends paid and the amount of net income are not directly used in the calculation of ROI.