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Walmart calculates and reports ROI, which is not a GAAP measure, in addition to ROA. The...

Walmart calculates and reports ROI, which is not a GAAP measure, in addition to ROA. The firm provides the formula it uses to calculate its ROI in its 10-K report. Examine the formula to try to make sense of what the firm tries to measure. Why do you think it makes sense for the firm to use ROI as well as ROA?

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Answer #1

Formula for ROI is net income divided by investment.

This formula goes to show hos much return the company have have generated for those who have trusted the company and had provided it's financial resources for the growth of the company as well as growth of their money as well.

It is pertinent to note here that both ROA and ROI conveys different meaning and message to the users of financial statements and ratios .

While ROA shows operating income of the company against it's assets and depicts how efficiently company is using it's assets to generate profit.

Whereas ROI measure profit of the company against investments and depicts how much Return company is generating for it's financiers.

Both set of data is used by different users for their respective understanding

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