Question

Which of the following can increase a company's return on investment?

A) decrease in operating income
B) decrease in total assets
C) decrease in asset turnover ratio
D) decrease in residual income

Answer 1

A decrease in residual income can increase a company's return on investment.

Step-by-step explanation:

To increase a company's return on investment, a decrease in operating income, total assets, and asset turnover ratio would not be favorable. However, a decrease in residual income can increase a company's return on investment. Residual income is the amount of profit a company generates above its required rate of return. By decreasing the residual income, the company can potentially improve its return on investment.