Ways to increase Return on Investments include all except a. Increasing Sales b. Decreasing Operating Expenses...

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Ways to increase Return on Investments include all except a. Increasing Sales b. Decreasing Operating Expenses c. Increasing

business accounting

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Answer 1

Answer #1

The correct option is

c. Increasing liabilities

Explanation:

- Increasing liabilities indirectly indicates that assets are also increasing which made return on assest to decrease.

- Return on Assets = Operating income ÷ Net assets

- ROA indicates the effectiveness of using of the assets in bringing returns to the business.

- The fllowing are the two ways in order to increase ROA

• Increase in Net operating income (numerator)

• Decrease in Net operating assets (denominator)

- From the given options,

• Increasing sales results in increase of net income. So that ROA increases.

• Decreasing operating expenses also results in increase of net income. So that ROA increases.

• Decrease in operating assets also increases the Return on assets.

- Hence the increasing laibilities is an odd one out which doesn't increases ROA.

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Answer 2

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