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LO5 11 ROI vs. residual income using different asset measures Senior management is trying to determine a consistent but fair valuation system to use to
LO5 11 ROI vs. residual income using different 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: 1 $1000 Operating profit Operating assets Current liabilities $1600 Division 2 3 $1600 15000 2000 2400 $1200 6000 4000 8000 400 200 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 return 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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