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Dear sir
Need some help on the this question specifically in question 1ii)b). This part of questions asked to recommend other profit-based measures. One of the measures I recommended was residual income, but it wasn’t in the model answer. Is it because it is not a profit-based measures e.g return on equity?
Thanks muchResidual income is a profit-based method as it tells you what income is left if you had had to pay for finance.
However, it is exclusively used to assess divisions as divisions often do no pay for their own finance, so a notional finance charge is made to them. In a non-divisionalised company the ‘residual income’ is just the profit after interest (or potentially the profit after interest and dividends)
Thanks sir this has been very helpful and thanks so much for your quick response!
Dear Sir,
Kindly help me understand how the examiner arrived at NOPAT figure of 183,626 for June 2012 question 1, and explain how and why the cash flows were adjusted for calculation of NPV.The rate used is 12.5% yet the resulting figures for the three years do not agree with this rate.Kindly helpDear Sir,
On the same question (Metis June 2012) the examiner states that one could still have answered part( a) of the question using the BSC .Kindly sir clarify or give ideas on what to explain on the internal processes and learning and innovation objectives in the question context.
2) Is it okay to use both BSC (for the financial and customer satisfaction objectives) and building blocks for the other part concerning resource utilisation and staff rewards and motivation?Q1 Sorry. I don’t really know what was going through the examiner’s mind. I don’t think BSC necessarily fits the data in the question very well.
Q2 I think it’s dangerous to mix models as they are created as an entity and cherry-picking bits from several is not likely to be satisfactory. Also mixing them up is very likely to cause confusion for the marker who might think you don’t know either model properly.
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