Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Ratios: Return on Assets (ROA)

Financial Accounting

14. Financial Statement Analysis

Ratios: Return on Assets (ROA)

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Multiple Choice

Why is Return on Investment (ROI) often considered the most commonly used financial performance measure?

Because it measures only the liquidity of a company.

Because it focuses solely on cash flows rather than accounting profits.

Because it only considers total assets and ignores net income.

Because it provides a standardized way to compare profitability across different companies and investments.

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Verified step by step guidance

Understand the concept of Return on Investment (ROI): ROI is a financial metric used to evaluate the profitability of an investment relative to its cost. It is expressed as a percentage and calculated using the formula: ROI = (Net Profit / Investment Cost) × 100.

Recognize the importance of ROI: ROI is widely used because it provides a standardized way to measure and compare the profitability of different investments or companies, regardless of their size or industry.

Clarify why ROI is not limited to liquidity or cash flows: ROI considers net income, which includes both cash and non-cash items, making it a comprehensive measure of profitability rather than focusing solely on liquidity or cash flows.

Explain why ROI is not restricted to total assets: ROI evaluates profitability in relation to the investment cost, which can include various components such as equity, debt, or specific project costs, rather than solely focusing on total assets.

Highlight the versatility of ROI: ROI is a versatile metric that can be applied across different industries, investment types, and scales, making it a valuable tool for comparing financial performance in a standardized manner.