Contrasting Return on Investment (ROI) and Residual Income

Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow For each division, compute the return on investment (ROI) in terms of turnover. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 15%. Compute the residual income for each division Is Yokohama's greater amount of residual income an indication that it is better managed? Yes No