When Defining Net Operating Income for Return on Investment (ROI)

question 28

Multiple Choice

When defining net operating income for return on investment (ROI) purposes, which of the following items should not be included?

• A) Sales revenue
• B) Cost of goods sold
• C) Interest expense
• D) Salaries expense

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Definitions:

Significant Influence

The power to participate in the financial and operating policy decisions of another company, but not control them.

Voting Stock

Shares that give the holder the right to vote on corporate matters, such as electing the board of directors and approving corporate policies.

Controlling Investor

An individual or entity that holds a significant portion of a company's shares or voting rights, granting them substantial influence or control over the company's decisions and policies.

Investee

A company in which an investor holds a minor equity or debt stake, implying a level of influence but not full control.