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Pro is a division of Mo and is an investment centre. The head office controls finance, HR
and IT expenditure but all other decisions are devolved to the local centres.
The statement of financial position for Pro shows net value of all assets and liabilities to be
$4,500m at the start of the year and $4,890m at the end. It carries no debt itself although
the group has debt liabilities.
The management accounts for income read as follows:
$m
Revenue 3,500
Cost of sales 1,800
Local administration 250
IT costs 50
Distribution 80
Central administration 30
Interest charges 90
Net profit 1,200
Ignore taxation.
What is the divisional ROI (1 decimal place)Good day,Pls i’m confused on how to get the capital employed inorder to calculate the roi
Why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers – they have answers and explanations!
On the information given. you have no choice but to use the net value of the assets and liabilities given in the question.
I checked the answer at the back and this is all that was written. I am confused on why the value at the start of the year was used
ROI = 30%; ROI = 1,370/4,500 = 30.4%The examiner prefers using the value at the start of the year (unless the question says different) on the basis that it is the net assets at the start of the year that are earning the profit made during the year.
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