What is the formula for calculating the Return on Owners Investment?

The formula for calculating Return on Owners Investment is derived from assessing how effectively a business uses its owners' equity to generate profits. Therefore, you divide the net profit by owner's equity. This ratio allows owners to understand the return they are earning on the capital they have invested in the business.

When owners know the return on their investment, they can make more informed decisions about future investment, business strategies, and performance expectations. A higher return indicates that a company is efficiently using its funds to generate profit, which is a key indicator of financial health and operational effectiveness.

The other options do not provide an accurate reflection of how the return relates specifically to the owners' investment in equity. Total assets and total revenues do not measure the direct relationship between profits and the equity invested by the owners. Similarly, shareholder profit is not a standard term used in the context of calculating returns on investment for owners, making it an unsuitable choice.