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

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Which of the following statements about Return on Investment (ROI) is true?

A higher ROI always indicates a lower risk investment.

ROI is only applicable to short-term investments.

ROI is calculated by dividing total liabilities by total assets.

ROI measures the profitability of an investment relative to its cost.

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Verified step by step guidance

Step 1: 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 helps investors compare the efficiency of different investments.

Step 2: Clarify the formula for ROI. ROI is calculated using the formula: ROI = (Net Profit / Cost of Investment) × 100. This formula measures how much profit is generated for every dollar invested.

Step 3: Analyze the incorrect statements. A higher ROI does not always indicate a lower risk investment, as ROI does not account for risk factors. ROI is applicable to both short-term and long-term investments, and it is not calculated by dividing total liabilities by total assets.

Step 4: Identify the correct statement. The correct statement is: ROI measures the profitability of an investment relative to its cost. This aligns with the definition and formula of ROI.

Step 5: Apply the concept. To use ROI effectively, compare the ROI of different investments to determine which provides the highest profitability relative to its cost, while also considering other factors like risk and time horizon.