AICPA Exam CPA-Business Topic 1 Question 53 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 53
Topic #: 1

The selection of the denominator in the return on investment (ROI) formula is critical to the measure's effectiveness. Which denominator is criticized because it combines the effects of operating decisions made at one level of the organization with financing decisions made at another organization level?

ATotal assets available.

BTotal assets employed.

CWorking capital plus other assets.

DShareholder's equity.

Show Suggested Answer

Suggested Answer: D

Choice 'd' is correct. Shareholders' equity is the ROI denominator that has been criticized because it combines the effects of operating decisions made at another organization level.

Choices 'a', 'b', and 'c' are incorrect, per the above Explanation:.

by Regenia at Jun 14, 2022, 09:38 PM

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