Question

‘Return on Investment’ is a critical profitability ratio. It is calculated as follows:

Return on Investment (ROI) = `"Net Profit"/ (- - -  -)xx100`

Choose the correct option from the following:

Options

• Equity

• Debt

• Total Capital Invested

• Debt + Interest on Debt

Answer 1

Total Capital Invested

Explanation:

Return on Investment (ROI) = `"Net Profit"/ "Total Capital Invested"xx100`

ROI is calculated using the total capital invested, which includes both equity and debt.