Simple ROI and Residual Income Calculations. Consider the following data: 1.) DIVISION X Y Z Invested Capital P2,000,000 (1)1,300,000 P1,250,000 Income (2) 100,000 P182,000 P 150,000 Revenue P4,000,000 P3,640,000 (3) 3,750,000 Income Percentage of Revenue 2.5% (4) 5% (5) 4% Capital Turnover (6) 2 (7) 2.8 3 Rate of Return on Invested Capital (8) 5% 14% (9) 12% Required: 1. Which division is the best performer 2. Suppose each division is assessed an imputed interest rate of 20% on invested capital. Compute the residual income for each division.
Simple ROI and Residual Income Calculations. Consider the following data: 1.) DIVISION X Y Z Invested Capital P2,000,000 (1)1,300,000 P1,250,000 Income (2) 100,000 P182,000 P 150,000 Revenue P4,000,000 P3,640,000 (3) 3,750,000 Income Percentage of Revenue 2.5% (4) 5% (5) 4% Capital Turnover (6) 2 (7) 2.8 3 Rate of Return on Invested Capital (8) 5% 14% (9) 12% Required: 1. Which division is the best performer 2. Suppose each division is assessed an imputed interest rate of 20% on invested capital. Compute the residual income for each division.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Simple ROI and Residual Income Calculations. Consider the following data:
| 1.) | DIVISION | ||||
| X | Y | Z | |||
| Invested Capital | P2,000,000 | (1)1,300,000 | P1,250,000 | ||
| Income | (2) 100,000 | P182,000 | P 150,000 | ||
| Revenue | P4,000,000 | P3,640,000 | (3) 3,750,000 | ||
| Income Percentage of Revenue | 2.5% | (4) 5% | (5) 4% | ||
| Capital Turnover | (6) 2 | (7) 2.8 | 3 | ||
| Rate of |
(8) 5% | 14% | (9) 12% |
Required:
1. Which division is the best performer
2. Suppose each division is assessed an imputed interest rate of 20% on invested capital. Compute the residual income for each division.
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