Fareast Group is a conglomerate with presence in various continents. Return on investment (ROI) has been...
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Fareast Group is a conglomerate with presence in various continents. Return on investment (ROI) has been the Group managers favorite tool used in measuring divisional performance. In the past two years, the Group's automobile division showed decreasing ROI results as follows: 2018 ROI (AED2,000,000/AED20,000,000) (AED20,000,000/AED10,000,000) = 0.20 2019 ROI (AED2,400,000/AED25,000,000) (AED25,000,000/AED 15,000,000) = 0.16 Profit/sales x sales/asset The top management of the Group was unamused by the poor performance as they required 25 percent in return for their additional investment in the automobile division. Required a. The Group's top management has sought your advice as to why the automobile failed to perform up to expectation Support your argument with calculations. (3 marks) b. In a meeting with the Group's top management, they asked you about the three steps in designing accounting-based performance measures. Describe the three steps, (5 marks) Fareast Group is a conglomerate with presence in various continents. Return on investment (ROI) has been the Group managers favorite tool used in measuring divisional performance. In the past two years, the Group's automobile division showed decreasing ROI results as follows: 2018 ROI (AED2,000,000/AED20,000,000) (AED20,000,000/AED10,000,000) = 0.20 2019 ROI (AED2,400,000/AED25,000,000) (AED25,000,000/AED 15,000,000) = 0.16 Profit/sales x sales/asset The top management of the Group was unamused by the poor performance as they required 25 percent in return for their additional investment in the automobile division. Required a. The Group's top management has sought your advice as to why the automobile failed to perform up to expectation Support your argument with calculations. (3 marks) b. In a meeting with the Group's top management, they asked you about the three steps in designing accounting-based performance measures. Describe the three steps, (5 marks)
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a Year Profit Sales Assets Profit Margin 2018 2000000 20000000 10000000 1000 ... View the full answer
Related Book For
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins
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