1. ROI:

What does ROI tell management?

Which segments have the best and worst ROI or are they roughly the same (how do they compare)?

How could a segment of this company improve its ROI? Give me an example of a specific action that could be taken to improve ROI.

2. Sales Margin:

What does Sales Margin tell management?

Which segments have the best and worst or are they roughly the same (how do they compare)?

How could a segment of this company improve its sales margin? Give me an example of a specific action that could be taken to improve sales margin.

3. Capital Turnover:

What does Capital Turnover tell management?

Which divisions have the best and worst? How do they compare?

How could a segment of this company improve its capital turnover? Give me an example of a specific action that could be taken to improve capital turnover.

4. Residual Income:

What does Residual Income tell management?

Do any of the segments fall short of management’s expectations? How can you tell?

5. Allocation decision:

If you were upper management (CEO of the whole corporation), and had excess funds to allocate among divisions, which division would you allocate those funds to and why?

6. Responsibility Accounting

What type of Responsibility centers are i) the 6 divisions, ii) corporate?

7. Measurement issues

What is the risk when companies use the net book value for assessing ROI.
 

Transcribed Image Text:

Division Frito-Lay North America (FLNA) Quaker Foods North America (QFNA) North America Beverages (NAB) Latin America Europe Sub-Saharan Africa (ESSA) Asia, Middle East and North Africa (AMENA) ROI 76% 73% 8% 16% 8% 18% Y Sales Margin 31% 26% 11% 14% 12% 20% Capital Turnover 2.49 2.83 0.71 1.14 0.66 0.92 Residual Income ▾ US$3,363.75 US$419.50 (US$5,193.50) (US$565.50) (US$2,988.50) (US$436.25) 80% 70% 60% 50% 40% 30% 20% 10% 0% ROI in Six Divisions || Frito-Lay Quaker Foods North America Latin America Europe Sub- Asia, Middle North America North America Beverages Saharan Africa East and North (FLNA) (QFNA) (NAB) (ESSA) Africa (AMENA) Division Frito-Lay North America (FLNA) Quaker Foods North America (QFNA) North America Beverages (NAB) Latin America Europe Sub-Saharan Africa (ESSA) Asia, Middle East and North Africa (AMENA) ROI 76% 73% 8% 16% 8% 18% Y Sales Margin 31% 26% 11% 14% 12% 20% Capital Turnover 2.49 2.83 0.71 1.14 0.66 0.92 Residual Income ▾ US$3,363.75 US$419.50 (US$5,193.50) (US$565.50) (US$2,988.50) (US$436.25) 80% 70% 60% 50% 40% 30% 20% 10% 0% ROI in Six Divisions || Frito-Lay Quaker Foods North America Latin America Europe Sub- Asia, Middle North America North America Beverages Saharan Africa East and North (FLNA) (QFNA) (NAB) (ESSA) Africa (AMENA)

Answer rating: 100% (QA)

ANS1 AROI Means how much gain or loss thats are earning of capital introdused or investment in busin... View the full answer