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Not everything is money and hopefully you will find it in yourself to help others one day js142004. I for one take a lot from this web site and the wonderful free opportunity it is providing to me personally. Very grateful indeed. I fully intend to help others in the future (and have done so in the past on this site in forums where people asked questions I knew the answer to)

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Lovely, that’s what I am planning to do. Thanks very much for providing them and also the forum.

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I don’t think I fully understand what you mean but I tend to look at the point that if the selling division isn’t treated fairly and asked to sell at low transfer price then they’ll go external to sell the product or if they’re forced to make the internal sale then there will be demoralisation etc in the selling division.
Does this help? Anyway good luck for tomorrow.

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So I would say, usually Group will be interested in the long term return on a project (unless otherwise stated) however a Divisional Manager will tend to be interested in the short term – unless he is not judged by his short term perf.

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This is where ROI vs RI or ROCE NPV comes in. ROI is usually used for divisional decisions. The others for Group. So if ROI is negative a divisional manager would refuse the investment as it would make his figures look bad but from Group point of view if you looked at ROCE and you got positive, the Group would want this investment to go ahead. Or Group could be looking at NPV and say even though in its first year the project has a negative NPV, it may bring in positive NPV after that. Group may see this as acceptable but Divisional manager wouldnt as it makes him/her look bad in the short run.

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Sorry forgot to say, once you prepare your 2nd table, you then need to chose between columns, the maximum regret value. In Kaplan answers, these were 8524400, 4492800 3494000 4160000. Then you chose the smallest one. I forgot to say this. becasue if you end up chosing the smallest one from the table itself, it would be wrong!

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Hi trinistudent001

it took me so long to understand this minimax regret. But I finally figured it out.

in mock question, take the pay off table prepared in b(i): We now need to prepare a new table for minimax regret, so write the col headings etc. Then:

Line 1, chose the highest value. You need to ask yoursefl, if I chose the best option do I have any regrets? No. Then the value goes in as 0 for the fist one. Move on to next value and deduct 832000 from minus 1164800 which = 1996800. Then deduct 832000 from 2662400=3494400 and so on.
Now go to line 2, ask yourself. which is the highest value in original table? 2163200. So if I chose this then the regret is zero so firstly place that in its place. Now do as above, deducting the rest from this figure.
All this is doing is finding the difference between chosing the best decision and the rest. So fill out the whole table like this.
Then you will see that you have 3494400 to chose to minimise the the max regret.
Hope this helps. If not, I have a web address I can give you which helped me understand how this works.
Cheers and thanks again for the questions. they’ve been invaluable.

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Thanks, you have saved me from certain death 🙂

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My understanding is that ROCE is used at company level, looking at how efficient companies capital investments are where as ROI can be applied to any particular investment. i.e divisions can use ROI to see if their particular investment was worth it etc.

If anyone thinks otherwise please let me know….I’ll go jump off a cliff!

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Hi, I am ofcourse not the tutor but I thought I’d try help.
Financial measures use figures from your financial statements where as NFPIs look at things like defects per employee or shift. Wastage per shift etc. Or no of returns per product. They dont come anywhere near the financial statements. Some other measures such as customer satisfaction is even harder to put any number on.
Operating profit measures are measures of profitability to sales so perhaps the word operating can remind you that the figures are calculated around the operating profit. Gross margin, profit margin etc all operating perf measures.

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Yes I realise the basic explanation for it but why is it done so? When you havent paid interest, why would you want to assume that you did? This is what I dont understand. I kind of understand from lenders point of view as for example, they may be charged tax on that. But I dont understand from borrowers point of view.

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Thanks for the explanation. Do we indicate at some part of our answer that we are guessing the 20000??
Hardly seems fair. I am beginning to get really worried about this exam!

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Thinking about it, it requires a bit more than what i wrote down as the Q says, from NAW Group point of view. So best to mention the 5m spare capacity and that this can actually be done at cost price but anything above that would need to be considered etc.
But seems like a really long winded section when he only allocated 3 marks to it! It doesnt seem fair.

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Thanks very much. I actually understand what you are saying in your last para.

Many thanks indeed
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Are you sure you are not reading the wrong line in the answer? I can only calculate 92K for catering.

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I have done CSR many times. What I havent seen the type of formula for the answer. Have you seen this before? Maybe I need to analyse it number at a time and see if I can make sense of it. It seems like you understand whats going on.

Thanks
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what is the name of the question please?

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My understanding from “failed to reach the minimum for Group A or Group B” is that they failed to reach a low score – not high score. The aim is the score as low as possible.
Princeacid, is this your understanding also?

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Are you actually looking at a particular Q or looking at the model, trying to understand?

The model tries to predict the likelihood of a company failing by giving each problem a score. Problem groups are Defects, Mistakes and Sypmtoms. For example, if we look at “Defects”, say if their Chief Exec is an autocrat they get 8 marks, if they have poor response to change etc they get 15 marks so far total being 23 (and below the acceptable total of 25 so they are ok) however say if they have no budgetary controls they’d get another 3 marks and the overall score for “Defects” would be 26 and this makes the problem area at risk of failure. The higher the score the worst the situation gets.

Its a bit like getting marks for bad behaviour and the higher the marks, the more risk of failure of the organisation.

Does that help at all?

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