Question

Which of the following formulas calculates the return on investment (ROI)? a.Operating Income / Average Operating Assets b.Total Capital Employed / Operating Income c.Residual Income / Sales d.Operating Income / Minimum Expected Return e.After-tax Operating Income / Total Capital Employed

Answer 1

A) Operating Income / Average Operating Assets

Step-by-step explanation:

The ROI is generated by dividing the net return on investment by the cost of investment and multiplying by 100% or by subtracting the initial value of the investment from the final value of the investment and dividing this new number by the cost of the investment and multiplying it by 100%

Answer 2

e.After-tax Operating Income / Total Capital Employed

Step-by-step explanation:

Returns on investments (ROI) is a financial ratio that measures how much profit is generated for every $1 invested by a company.

Mathematically, the formula for ROI

= Net Profit / Total Investment * 100

As such, where a net loss is made by a company, the ROI will be negative. The net income is the after-tax Operating Income while the total capital employed is equivalent to the total investment.