Target Exam

CUET

Subject

Entrepreneurship

Chapter

Business Arithmetic

Question:

Which of the following statement (s) is correct in the context of Return on Investment?

Options:

ROI = Net Profit x 100/Total Capital Invested

ROI=Net Income*100/Equity of Investor

For a true measure of how "own money" is being used, ROI is a good indicator.

Both 1 and 3

Correct Answer:

ROI = Net Profit x 100/Total Capital Invested

Explanation:

Return on investment equals the net income from a business or a project divided by the total money invested in the venture multiplied by 100.
ROI = (Net Profit /Total Capital Invested) *100
For a true measure of how "own money" is being used, ROE is a good indicator (not ROI). ROI is a good indicator for total capital employed i.e. equity plus debt.