020-21 >> ACT 310-1 (Lec) >> Management Accounny Q Fareast Group is a conglomerate with presence in various continents. Return on investment (ROI) has been the Group managers' favorite tool used in measuring divisional performance in the past two years, the Group's automobile division showed decreasing ROI results as follows: 2018 ROI (AED 2,000,000/AED 20.000.000) (AED 20,000,000/AED 10,000,000) - 0.20 2019 ROI = (AED 2,400.000/AED25.000.000) (AED 25,000,000 AED 15,000,000) - 0.16 FI Profit/sales x sales/asset The top management of the Group was unamused by the poor performance as they required 25 percent in return for their additional investment in the automobile division Required a. The Group's top management has sought your advice as to why the automobile failed to perform up to expectation Support your argument with calculations. (3 marks) b. In a meeting with the Group's top management, you came to learn that the ROI calculations given for the automobile division comprised income from operations, net sales, and the closing value of invested capital for each year. They also mentioned to you a keyword 'Dupont". In your mind, you are considering an alternative to make the ROI values read better. Propose your alternative and discuss (5 marks) 020-21 >> ACT 310-1 (Lec) >> Management Accounny Q Fareast Group is a conglomerate with presence in various continents. Return on investment (ROI) has been the Group managers' favorite tool used in measuring divisional performance in the past two years, the Group's automobile division showed decreasing ROI results as follows: 2018 ROI (AED 2,000,000/AED 20.000.000) (AED 20,000,000/AED 10,000,000) - 0.20 2019 ROI = (AED 2,400.000/AED25.000.000) (AED 25,000,000 AED 15,000,000) - 0.16 FI Profit/sales x sales/asset The top management of the Group was unamused by the poor performance as they required 25 percent in return for their additional investment in the automobile division Required a. The Group's top management has sought your advice as to why the automobile failed to perform up to expectation Support your argument with calculations. (3 marks) b. In a meeting with the Group's top management, you came to learn that the ROI calculations given for the automobile division comprised income from operations, net sales, and the closing value of invested capital for each year. They also mentioned to you a keyword 'Dupont". In your mind, you are considering an alternative to make the ROI values read better. Propose your alternative and discuss
