Global Imex has two divisions; one located at Accra and the other in Takoradi. The following is an extract from the annual report for the 2010 financial year ACCRA TAKORADI Profit Before Depreciation 450,000 620,000 Depreciation 120,000 130,000 Non Current Assets 1,200,000 1,300,000 Current Assets 750,000 1,000,000 Current Liabilities 350,000 400,000 Cost of Capital is 20% Required (i) Using Return on Investment (ROI) and Residual Income, comment on the performance of the divisions. (ii) The Takoradi branch intends to sell one of the non-current assets with book value of GH¢120,000. This asset generates a profit of GH¢60,000. Accra also wants to acquire another asset costing GH¢90,000 that will generate a profit of GH¢40,000. To what extent will the decisions affect the performance of the divisions?
Global Imex has two divisions; one located at Accra and the other in Takoradi. The following is an extract from the annual report for the 2010 financial year ACCRA TAKORADI Profit Before Depreciation 450,000 620,000 Depreciation 120,000 130,000 Non Current Assets 1,200,000 1,300,000 Current Assets 750,000 1,000,000 Current Liabilities 350,000 400,000 Cost of Capital is 20% Required (i) Using Return on Investment (ROI) and Residual Income, comment on the performance of the divisions. (ii) The Takoradi branch intends to sell one of the non-current assets with book value of GH¢120,000. This asset generates a profit of GH¢60,000. Accra also wants to acquire another asset costing GH¢90,000 that will generate a profit of GH¢40,000. To what extent will the decisions affect the performance of the divisions?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Global Imex has two divisions; one located at Accra and the other in Takoradi.
The following is an extract from the annual report for the 2010 financial year
| ACCRA | TAKORADI | |
| Profit Before |
450,000 | 620,000 |
| Depreciation | 120,000 | 130,000 |
| Non Current Assets | 1,200,000 | 1,300,000 |
| Current Assets | 750,000 | 1,000,000 |
| Current Liabilities | 350,000 | 400,000 |
Cost of Capital is 20%
Required
(i) Using
(ii) The Takoradi branch intends to sell one of the non-current assets with book value of GH¢120,000. This asset generates a profit of GH¢60,000. Accra also wants to acquire another asset costing GH¢90,000 that will generate a profit of GH¢40,000. To what extent will the decisions affect the performance of the divisions?
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