The table below shows the annual results for the four divisions of a group company. Tasks 1.
Question:
The table below shows the annual results for the four divisions of a group company.
Tasks
1. Calculate the return on capital employed for each of the four divisions and rank them accordingly.2. Calculate the residual income for each of the four divisions using an interest rate of 5% and rank them accordingly.3. Comment on your findings.
Step by Step Answer:
Return on Capital Employed ROCE for each division ROCE Divisional Pretax Profit Capital Employed x 1...View the full answer
Managerial Accounting Decision Making and Performance Management
ISBN: 978-0273764489
4th edition
Authors: Ray Proctor
Related Video
Return on capital employed or ROCE is a profitability ratio that measures how efficiently a company can generate profits from its capital employed by comparing net operating profit to capital employed. In other words, the return on capital employed shows investors how many dollars in profits each dollar of capital employed generates. ROCE is a long-term profitability ratio because it shows how effectively assets are performing while taking into consideration long-term financing
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