Essay
The following information relates to the operating performance of three divisions of Paul,Inc.for last year.
Required:
a.Compute the rate of return on investment (ROI)of each division for last year.
b.Assume that the firm levies a charge on each division for the use of funds.The charge is 10 percent on investment,and the accounting system deducts it in measuring divisional net income.Recalculate ROI using divisional net income after deduction of the use-of-funds charge in the numerator.
c.Which of these two measures do you think gives the better indication of operating performance? Explain your reasoning.
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Correct Answer:
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_TB2144_00 b._TB2144_00 c.As the a...View Answer
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