What is the formula for ROI (Return on Investment)?

The formula for Return on Investment (ROI) is commonly defined as net profit divided by the capital employed, making option B the appropriate choice: controllable profit divided by capital employed. This is particularly relevant in managerial accounting contexts where it focuses specifically on profits that management can influence directly through their operational decisions.

By using controllable profit, the formula reflects the effectiveness of management in generating returns based on the resources they manage. Capital employed refers to the total funds used for business operations, which can include equity and debt, making it a solid metric for assessing how well those funds are used to generate profit.

The other choices do not provide the correct context or definitions typically associated with ROI. The first option, while it involves net profit, is not as specific as using controllable profit, which gives a clearer indication of managerial performance. The third option addresses total revenue in relation to total assets, moving away from the profit focus. The last option, involving operating profit over total equity, changes the scope of the measure to a balance sheet perspective rather than a direct investment return metric.

Overall, choice B captures the essence of how management can assess their investment effectiveness through controllable factors.