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Which company will compute the highest roi ammount

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Reference no: EM133534183

Question: Consider two companies (A and B) that have been in business for the same amount of time (5 years) and they perform exactly equally with equal assets acquired on the same dates at the same costs. For the Return on Investment (R.O.I.) calculation, Company A uses net book values of assets to calculate the Investment amount and Company B uses gross values of assets (original cost) to calculate the Investment amount for ROI. Both companies use operating income for the "return" or profit component of the ROI calculation.

  1. Which company will compute the highest ROI ammount?
  2. Explain why.

 

Reference no: EM133534183

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