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Hello sir.
Short question.
It says that Residual income and RoI are calculated after deducting depreciation charges on non-current assets of the division, but I thought that Diviosional Manager has no controls usually over these 2 (if others arent mentioned): Head office costs and Depreciation charges.
Could you please help me with understanding what’s controllable and whats not?
Thaaaank you!!!
If they are being used to measure the performance of the division as a whole, then both are certainly relevant.
If they are being used to measure the performance of the manager, then they are only relevant if it is an investment division. In this case the manager has the authority to make investment decisions.
I do suggest you watch my free lectures because I say this in my lecture. The lectures as a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.
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