Certified Management Accountant 2025 – 400 Free Practice Questions to Pass the Exam

Question: 1 / 430

What is the formula to calculate the rate of return on an investment?

Net worth / investment amount

Return on investment / time invested

Return on investment / amount invested

The rate of return on an investment is calculated using the formula that divides the return generated by the investment (often referred to as the net profit or income from the investment) by the amount of money initially invested. This relationship provides a clear and quantifiable measure of how effectively the invested funds are generating profits. By using this formula, you can express the rate of return as a percentage, which allows for a straightforward comparison between different investments or the same investment over different time periods.

The concept behind this formula is to provide an understanding of the profitability of the investment relative to the capital put at risk. It helps investors assess whether their investment decisions are yielding adequate returns compared to other opportunities available in the market.

Get further explanation with Examzify DeepDiveBeta

Net profit / total assets

Next Question

Report this question

Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy