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11 ROI vs. residual income using different LOS asset measures Senior management is trying to determine a consistent but fair valuation system to use to
11 ROI vs. residual income using different LOS asset measures Senior management is trying to determine a consistent but fair valuation system to use to evaluate each of its four divisions. This year's performance data are summarised as follows: Division 1 2 3 4 Operating profit $1000 $1200 $1600 $1600 Operating assets 4000 6000 15000 8000 Current liabilities 400 2000 2400 200 REQUIRED a Which division would earn a bonus if senior management used ROI based on operating assets? b Which division would earn a bonus if senior management used ROI based on operating assets minus current liabilities? c Which division would earn a bonus if senior management calculated residual income based on operating assets with a minimum retum of 12 per cent? d Which division would earn a bonus if senior management calculated residual income based on operating assets minus current liabilities with a minimum return of 12 per cent
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