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A company that is seeking to increase ROI should attempt to decrease:
 
a) sales.
 
b) turnover.
 
c) margin.
 
d) average operating assets.

Asked on 6 Apr 2020

Answer

OC2736346
Answered on 6 Apr 2020

d) average operating assets.

Return on investment helps investors to decide whether an investment should be made in an undertaking or not. The investor will choose the project or investment that yields a higher return on investment, among a given arrangement of alternative projects. The return on investment is determined by dividing the net income with the average operating assets. Net income will be in numerator and the average operating assets will be in the denominator. So as to expand the return on investment, the denominator ought to be diminished. Therefore, average operating assets ought to be diminished to increase the return on investment. Decreasing sales won't increment the return on investment. As opposed to it diminishes the return. Subsequently, alternative ‘sales’ is incorrect. Diminishing turnover will not increase the return on investment. This is no way related to the return on investment, as the sales and average operating assets are the components of calculating the turnover. Hence, option ‘turnover’ is incorrect. Decreasing margin will not increase the return on investment. This is no way related to the return on investment, as the net income and sales are the components of calculating the margin. Hence, option ‘margin’ is incorrect.

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