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Return on investment (ROI) for a firm (B) measures management's overall effectiveness in generating profits with the available assets.
What is the return on investment?
- A ratio between net income and investment is known as return on investment or return on costs.
- A high ROI indicates that the returns on the investment outweigh the costs.
- ROI is used as a performance metric to assess an investment's effectiveness or to compare the effectiveness of multiple distinct investments.
What are profits?
- The difference between an economic entity's revenue from its outputs and the opportunity costs of its inputs is what is known as a profit.
- It is equivalent to total income less total expenses, which includes both direct and indirect expenses.
What are assets?
- Any resource that a company or other economic organization owns or controls is considered an asset in financial accounting.
- Anything that has the potential to provide positive economic value qualifies.
- The ownership value that can be turned into cash is represented by assets.
Therefore, return on investment (ROI) for a firm (B) measures management's overall effectiveness in generating profits with the available assets.
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