The correct answer is: A. Net Profit Ratio à Capital Turnover Ratio.
Return on Investment (ROI) is a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio.
Net profit ratio is a measure of profitability that shows how much of every dollar of sales a company keeps as profit. It is calculated by dividing net income by net sales.
Capital turnover ratio is a measure of how efficiently a company uses its capital to generate sales. It is calculated by dividing net sales by average total assets.
By multiplying the net profit ratio by the capital turnover ratio, we can get a measure of how much profit a company generates for every dollar of capital it invests. This is known as return on investment (ROI).
Option B is incorrect because it does not take into account the capital employed by the company.
Option C is incorrect because it is the formula for profit margin, not ROI.
Option D is incorrect because it is the formula for cost of goods sold, not ROI.