Question

A division earning a positive profit will always increase its return on investment (ROI) if it increases operating expenses and Group of answer choices investment by the same dollar amount. sales by the same percentage. sales by the same dollar amount. investment by the same percentage.

Answer 1

Answer: Sales by the same dollar amount.

Step-by-step explanation:

Return on Investment is calculated by the formula:

= (Sales - Operating income) / Investment

From the above, you can see that if investment is increased relative to sales and operating expenses are increased as well, ROI will decrease instead of increase.

This formula deals with dollar amounts not percentages so increasing sales by the same percentage is not right.

Only correct option is to increase sales dollar amount as this would lead to a higher numerator which would then give a larger ROI.