Which of the following ratios measures the profitability of the money invested in the firm's assets?

Question

a. Quick Ratio
b. Return on Owners' Equity
c. Gross Margin Ratio
d. Return on Investment

Answer 1

This seems like it may be a trick question. It's not A or C.

Return on investment is just what it says: What do you have invested in the business, and what is your return (i.e., profit) on that investment. But the question is worded funny: "invested in the firm's assets". The equity goes up or down depending on the book value of the assets of the firm. Not all invested money necessarily becomes and asset. In fact, it may be a liability if the money loan to the firm. Without knowing what your class has taught, I don't know if the answer is B or D. I'd probably lean to D.