Accounting: What the Numbers Mean
11th Edition
ISBN: 9781259535314
Author: David Marshall, Wayne William McManus, Daniel Viele
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 10, Problem 10.14C
Case 10.14
LO 5
Calculate
Required:
a. Based on a cursory review of the data, can you identify any significant trends in the consolidated totals? Are there any notable trends in the data for specific business segments?
b. Using the DuPont model to show margin and turnover, calculate ROI for each of the three primary geographic segments for 2014. Round your percentage answers to one decimal place.
c. Looking only at the data presented here, which business segment appears to offer McDonald’s Corp, the greatest potential for high returns in the future?
d. Comment about the difficulties you may encounter when attempting to interpret the Other Countries and Corporate segment results.
e. Can you think of any ways in which McDonald’s could improve upon its classification of geographic segment data?
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EXERCISE 11-8 Computing and Interpreting Return on Investment (ROI) LO11-1
Selected operating data for two divisions of Outback Brewing, Ltd.., of Australia are given below-
Division
New South
Wales
Queensland
$7,000,000
$2,000,000
$420,000
$800,000
$4,000,000
$2,000,000
$360,000
$950,000
Sales....
Average operating assets
Net operating income
Property, plant, and equipment (net)
Required:
Compute the rate of return for each division using the return on investment (ROI) formula
stated in terms of margin and turnover.
2.
1.
Which divisional manager seems to be doing the better job? Why?
EXERCISE 11-9 Return on Investment (ROL and Do
Exercise 14-36 (Algo) Comparing Business Units Using Economic Value Added (EVA) (LO 14-4)
Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and
assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance.
Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of
sales).
The following information is from Lauderdale's first year of operations:
Revenues
Cost of sales
Selling, General and
Administrative (all fixed)
Corporate overhead.
Region I
$ 1,206,000
453,000
429,000
Region II
$ 1,656,000
813,000
639,000
R&D expenditures
Current liabilities
Region III
$ 2,256,000
1,143,000
859,000
Information on the division assets in the three regions of Lauderdale Corporation follows:
Region I
$ 706,000
Region II
Region III
636,000
1,296,500
Lauderdale Corporation has a cost of capital…
Case 1: ROI
You are comparing the performance of two (2) separate divisions, segments A and B, using ROI Analysis.
A
в
P100,000.00 P500,000.00
30,000.00
Sales
Operating Expenses
300,000.00
Net Operating income
70,000.00
200,000.00
Average Operating Assets
10,000.00
40,000.00
Required: Using ROI Analysis, which segment is performing better?
To answer this question, you need to:
1. Compute the ROi of each segment and
2. Compute the components of ROI of each segment
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