ACCT 2550 Chapter Notes - Chapter 12: Earnings Before Interest And Taxes, Balanced Scorecard
28 Jun 2019
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Three ways to improve roi: increase sales, reduce expenses, reduce assets. Controlling the rate of return: monthaven burger grill"s manager was able to increase sales from ,000 to. ,000 which increased net operating income to ,000: there was no change in the average operating assets of the segment, calculate the new roi. As division manager would you invest in this project: a division manager would likely not invest in this project because it would lower their bonus! However this would be a good investment for the company! Residual income (ri: another measure of an investment centre"s performance is residual income, residual income is the net operating income that an investment centre earns above the minimum required return on its operating assets. Residual income example: a division of zepher, inc. has average operating assets of ,000 and is required to earn a return of 20% on these assets, in the current period the division earns ,000, calculate the division"s residual income.
