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CIM (DECEMBER 2015)

b) Discuss whether ROI is providing a fair basis for calculating the managers’ bonuses and
the problems arising from its use at CIM Co for the year ended 31 August 20X5.

PART I Dont understand:
This is largely attributable to the fact that Division N invested $6.8m in new equipment during the year. If this investment had not been made, net assets would have been only $10.04m
and the ROI for Division N would have been 19.62%.
a)
cap employed 16840
Controllable profit 1970
ROI % 11.70

Division N invested $6.8m in new equipment.
can you explain the capital employed if they didnt invested. I dont understand that if they hadn’t invested, non current assets will decrease by 6.8m right? but what about cash? won’t it increase ?
how did they come up with cap emp ans

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