Answer (D) is correct . ROI equals net income divided by investment. Increasing net income (e.g., by decreasing expenses or by increasing prices or sales volume) or decreasing the investment base improves ROI. Hence, any of the actions listed increases the return on investment. Management and the accounting profession are very concerned with classification of expenses and assets and other decisions involving the accounting for these items to achieve a proper calculation of return on investment.
Answer (A) is incorrect because Decreasing expenses or assets while holding other factors constant improves return on investment.
Answer (B) is incorrect because Increasing selling prices while holding other factors constant improves return on investment.
Answer (C) is incorrect because Increasing sales volume while holding other factors constant improves return on investment.
|
