**Tan Corporation of Japan: Regional Division Financial Analysis** Tan Corporation of Japan operates two regional divisions with headquarters in Osaka and Yokohama. Below is the selected financial data for these divisions: | Division | Osaka | Yokohama | |--------------|---------------|--------------| | **Sales** | $10,500,000 | $35,000,000 | | **Net Operating Income** | $630,000 | $2,800,000 | | **Average Operating Assets** | $3,500,000 | $17,500,000 | **Required:** 1. **Return on Investment (ROI) Calculation:** - Calculate the ROI for each division. 2. **Residual Income Calculation:** - Determine the residual income for each division, given that the company’s minimum required rate of return is 15%. **Instructions:** Complete the calculations and enter your answers in the designated sections below. **ROI Input Section:** | Division | ROI (%) | |----------|---------| | Osaka | | | Yokohama | | Proceed to the next requirement by selecting "Required 2." Complete all steps for a comprehensive understanding of financial performance. ### Tan Corporation of Japan: Regional Divisions Analysis Tan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. The selected data for these divisions is presented below: #### Division Data | Division | Osaka | Yokohama | |------------|----------------|---------------| | **Sales** | $10,500,000 | $35,000,000 | | **Net Operating Income** | $630,000 | $2,800,000 | | **Average Operating Assets** | $3,500,000 | $17,500,000 | ### Required Tasks 1. **Compute the Return on Investment (ROI) for each division.** ROI is calculated as: \[ \text{ROI} = \left(\frac{\text{Net Operating Income}}{\text{Average Operating Assets}}\right) \times 100 \] 2. **Compute the Residual Income for each division, assuming the company’s minimum required rate of return is 15%.** Residual Income is calculated as: \[ \text{Residual Income} = \text{Net Operating Income} - (\text{Average Operating Assets} \times \text{Minimum Required Rate of Return}) \] ### Interactive Component To complete the analysis, enter your calculations in the tabs provided for each required task. #### Calculation Table | Division | Osaka | Yokohama | |------------|--------------|---------------| | **Residual Income** | ___ | ___ | Click on each required task to input your answers.

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Effect of Industry Characteristics on Financial Statement Relations: A Global Perspective. Effective financial statement analysis requires an understanding of a firms economic characteristics. The relations between various financial statement items provide evidence of many of these economic characteristics. Exhibit 1.24 (pages 6667) presents common-size condensed balance sheets and income statements for 12 firms in different industries. These common-size balance sheets and income statements express various items as a percentage of operating revenues. (That is, the statement divides all amounts by operating revenues for the year.) A dash for a particular financial statement item does not necessarily mean the amount is zero. It merely indicates that the amount is not sufficiently large for the firm to disclose it. A list of the 12 companies, the country of their headquarters, and a brief description of their activities follow. A. Accor (France): Worlds largest hotel group, operating hotels under the names of Sofitel, Novotel, Motel 6, and others. Accor has grown in recent years by acquiring established hotel chains. B. Carrefour (France): Operates grocery supermarkets and hypermarkets in Europe, Latin America, and Asia. C. Deutsche Telekom (Germany): Europes largest provider of wired and wireless telecommunication services. The telecommunications industry has experienced increased deregulation in recent years. D. E.ON AG (Germany): One of the major public utility companies in Europe and the worlds largest privately owned energy service provider. E. Fortis (Netherlands): Offers insurance and banking services. Operating revenues include insurance premiums received, investment income, and interest revenue on loans. Operating expenses include amounts actually paid or amounts it expects to pay in the future on insurance coverage outstanding during the year. F. Interpublic Group (U.S.): Creates advertising copy for clients. Interpublic purchases advertising time and space from various media and sells it to clients. Operating revenues represent the commissions or fees earned for creating advertising copy and selling media time and space. Operating expenses include employee compensation. G. Marks Spencer (U.K.): Operates department stores in England and other retail stores in Europe and the United States. Offers its own credit card for customers purchases. H. Nestl (Switzerland): Worlds largest food processor, offering prepared foods, coffees, milk-based products, and mineral waters. I. Roche Holding (Switzerland): Creates, manufactures, and distributes a wide variety of prescription drugs. J. Sumitomo Metal (Japan): Manufacturer and seller of steel sheets and plates and other construction materials. K. Sun Microsystems (U.S.): Designs, manufactures, and sells workstations and servers used to maintain integrated computer networks. Sun outsources the manufacture of many of its computer components. L. Toyota Motor (Japan): Manufactures automobiles and offers financing services to its customers. REQUIRED Use the ratios to match the companies in Exhibit 1.24 with the firms listed above.

Kanye Achebe just became the operations manager of Weston Transportation. Weston transports large crates for online companies and transports containers overseas. Kanye would like to evaluate each divisional manager on a basis similar to segmental reporting required by generally accepted accounting principles (GAAP) financial statements contained in annual reports. These data include a presentation of net sales, operating profit and loss before and after taxes, total identifiable assets, and depreciation for segment reported. Kanye thinks that evaluating business division managers by the same criteria as the total company is appropriate. A. Explain why you think the chief financial officer (CFO) disagrees and tells Kanye that publicly reporting information might demotivate managers. B. For better evaluation of the managers, what type of information should Kanye propose that the CFO might accept?