Final answer:
If a firm's investment in inventory increases while profits stay the same, the firm's Return on Assets (ROA) will decrease, as more assets now produce the same amount of income.
Step-by-step explanation:
If a firm spends more on inventory and profits remain the same, Return on Assets (ROA) will decrease. ROA is calculated by dividing the net income by the total assets of a company. If a company increases its assets by purchasing more inventory but its net income does not change, the denominator in the ROA equation increases while the numerator stays constant. This leads to a lower ROA value.