# ECONOMICS

## COST ACCOUNTING

### PERFORMANCE MEASUREMENT

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Return on investment =
 A (Operating profit ÷ Cost ) x 100 B (Operating profit ÷ Investment) x 100 C (Operating profit ÷ Revenue) x 100 D (Operating profit ÷ Sales) x 100
Explanation:

Detailed explanation-1: -The most common is net income divided by the total cost of the investment, or ROI = Net income / Cost of investment x 100.

Detailed explanation-2: -Return on investment (ROI) is calculated by dividing the profit earned on an investment by the cost of that investment. For instance, an investment with a profit of \$100 and a cost of \$100 would have an ROI of 1, or 100% when expressed as a percentage.

Detailed explanation-3: -ROI equals net operating income divided by average operating assets times 100. For example, if your small business has \$30, 000 in net operating income and \$100, 000 in average operating assets, your ROI would be \$30, 000 divided by \$100, 000 times 100, which is 30 percent.

Detailed explanation-4: -In the simple-interest formula I = Prt, the variable I stands for the interest on the original investment, P stands for the amount of the original investment (called the “principal"), r is the interest rate (expressed in decimal form), and t is the time. For annual interest, the time t must be in years.

Detailed explanation-5: -The term “percent” means “per 100” so 1000% is 1000/100 = 10. Thus if one invests \$4000.00 and makes 1000% then the return would be 10*\$4000.00 = \$40 000.00.

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