Cool Ltd has two retail divisions, which reported the following results for the financial year ending 30 June 2018.

a) Based on the ROI information provided above, which division was more successful? Explain. Explain also whether you agree with this conclusion.

b) Calculate each divisions residual income (RI) under each of the following assumptions

about the firms minimum required rate of return: 10%, 15%, 18%

c) In what way can the use of ROI as a performance measure lead to bad decisions? How does the RI approach overcome this problem?

Cool Ltd has two retail divisions, which reported the following results for the financial year ending 30 June 2018. Profit Average invested capital Return on Investment (ROI) Shirts Trousers $450,000 $100,000 $3,000,000 $500,000 15% 20% Required