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Chapter 13 - Measuring financial performance for organisations/divisions Quality Products Ltd has three divisions being operated autonomously and independently. Their extracted summary of financial results
Chapter 13 - Measuring financial performance for organisations/divisions Quality Products Ltd has three divisions being operated autonomously and independently. Their extracted summary of financial results for the year just ended were as follows: Sales revenue Cost of goods sold Profit before tax Total assets Current liabilities East West International $30,000,000 $40,000,000 $50,000,000 15,000,000 25,000,000 37,000,000 4,500,000 4,750,000 5,000,000 30,000,000 30,500,000 31,000,000 5,000,000 7,500,000 4,000,000 The company's desired minimum rate of return is 15%. The tax rate is 20%. The weighted average cost of capital (WACC) of the company is 16%. Required: Calculate the following financial performance indicators for each division: (a) Return on investment (ROI) showing return on sales and investment turnover. (b) Residual income (RI) (c) Economic value added (EVA)
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