Answered: Division Y Profit before interest and…

Division Y Profit before interest and tax P185 000 P172, 000 Capital employed P1, 540, 000 P1, 650, 000 The cost of capital is 10%. Calculate and comment on the p

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The following results are available for Division X and Y:
Division X Division Y
Profit before interest and tax P185 000 P172, 000
Capital employed P1, 540, 000 P1, 650, 000
The cost of capital is 10%.
Calculate and comment on the performance of the departments based on:
a. Return on capital employed (4 marks)
b. Residual incom

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