What will happen to return on investment (ROI) if current assets decrease while everything else remains the same?

Return on investment (ROI) is calculated as the net income generated from an investment divided by the cost of that investment. In this context, if current assets decrease while all other factors, including net income and the total investment amount (the denominator), remain constant, the overall effect can significantly impact the ROI calculation.

A decrease in current assets means that the total assets part of the investment denominator is reduced. Since the numerator (net income) remains unchanged, the ROI will increase as the same amount of income is being earned on a smaller asset base. This reflects a more efficient use of the remaining assets, generating higher returns relative to the total investment value.

Therefore, if current assets decrease and everything else stays the same, the ROI will increase, indicating better profitability relative to the reduced level of investment. This scenario emphasizes the relationship between asset management and return efficiency in accounting.