Solution-Calculate the return on investment and residual

Calculate the return on investment and residual income

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Reference no: EM132530776

Arctan plc has two divisions, North and South, whose respective performance are under review. North Division is currently earning a profit of £50,000 and has net assets of £180,000. South Division currently earns a profit of £95,000 with net assets of £355,000. KH plc has a current cost of capital of 14 per cent.

Question a) Distinguish between non-divisionalised and divisionalised organisational structures.

Question b) Using the information above, calculate the return on investment and residual income figures for the two divisions under review and comment on your results.

Question c) State which method of performance evaluation (i.e. return on investment or residual income) would be more useful when comparing divisional performance and explain why.

Question d) Discuss which general aspects of performance measures would be appropriate for a service sector company.

Question e) Explain why it is preferable to distinguish between managerial and economic performance, and describe the factors to be considered in designing financial performance measures for evaluating divisional managers.

Reference no: EM132530776

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Calculate the return on investment and residual income

Reference no: EM132530776

Reference no: EM132530776

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