Question
GHI Corporation has three investment centers: East, West, and Central. The following financial data is provided for the year ended 31 December 2024: Item East
GHI Corporation has three investment centers: East, West, and Central. The following financial data is provided for the year ended 31 December 2024:
Item | East ($) | West ($) | Central ($) | Total ($) |
Sales revenue | 500,000 | 600,000 | 700,000 | 1,800,000 |
Operating income | 50,000 | 60,000 | 70,000 | 180,000 |
Total assets | 400,000 | 500,000 | 600,000 | 1,500,000 |
Required: a. Calculate the return on investment (ROI) for each investment center. b. Compute the residual income (RI) for each investment center (assume a required rate of return of 10%). c. Evaluate the performance of each investment center based on ROI and RI. d. Discuss the advantages and disadvantages of using ROI and RI for performance evaluation.
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International Financial Reporting and Analysis
Authors: David Alexander, Anne Britton, Ann Jorissen
5th edition
978-1408032282, 1408032287, 978-1408075012
