Final answer:
The formula mentioned is related to financial analysis and specifically the return on investment. It is commonly used to assess how efficiently a company is utilizing its operating assets to generate income.
Step-by-step explanation:
The subject of this question is Business. The formula mentioned is related to financial analysis and specifically the return on investment. It is commonly used to assess how efficiently a company is utilizing its operating assets to generate income.
Net Operating Income: This represents the income generated from a company's core operations, excluding interest and taxes. It can be found in the financial statements or calculated by subtracting operating expenses from operating revenues.
Average Operating Assets: This represents the average value of a company's assets used in its day-to-day operations, such as inventory, equipment, and buildings. If not given directly, it can be calculated by adding the beginning and ending values of operating assets and dividing by 2.Using the formula, the return on investment or return on assets can be calculated by dividing the net operating income by average operating assets.