A Company Currently Earning a Profit Can Increase Its Return

question 85

Multiple Choice

A company currently earning a profit can increase its return on investment (ROI) by:

• A) Increasing sales revenue and operating expenses by the same dollar amount.
• B) Decreasing sales revenues and operating expenses by the same percentage.
• C) Increasing investment and operating expenses by the same dollar amount.
• D) Increasing sales revenues and operating expenses by the same percentage.
• E) Decreasing investment and sales by the same percentage.

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Definitions:

Deferred Income Tax Liability

A tax obligation that a company owes but has not yet paid, resulting from temporary timing differences between its accounting earnings and its taxable income.

Potential Benefit

The future gain or return that may be obtained as a result of an investment or action.

Earnings Quality

Pertains to the degree to which reported income provides a true representation of the company's financial performance.

Source of Cash Flow

Source of Cash Flow refers to the origins of the money coming into a business, indicating how the company is earning its income.