Performance measurement

This topic has 3 replies, 2 voices, and was last updated 4 years ago by John Moffat.

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March 16, 2022 at 12:15 pm #651360
pinkyjovin123
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Hello Sir

A company wishes to evaluate a division which has the following extracts from income statement and statement of financial position.

Income statement

Sales
Gross profit
Net profit

Statement of financial position

NCA. 750000
Current assets 350000
CL (450000)
Net Assets 650000

What is the residual income for the division if the company has a cost of capital of 18%

Answer is 3000

Could you please show me the steps …

TIA
March 16, 2022 at 4:03 pm #651373
John Moffat
Keymaster
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You have not typed out the information from the SOPL.

The residual income is the net profit less 18% x $650,000.

This is all explained in my free lectures.
March 18, 2022 at 2:25 pm #651500
pinkyjovin123
Participant
- Topics: 92
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Sorry Sir

Can you please show me how we get the answer?

Completed question is below:

Sales 500000

Gross profit 200000

Net profit 120000

Answer is 3000

TIA
March 18, 2022 at 8:00 pm #651507
John Moffat
Keymaster
- Topics: 57
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Have you actually read my previous reply (and have you actually watched my free lectures on this?).

Try doing what I wrote before. Take the net profit and subtract 18% x $650,000.
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