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1. What is the definition of work study?
2. Why growth of sales is a non financial objective?
3. An investment centre earns a ROI of 18% and a residual income of $300,000. The cost of capital is 15%. A new project offers a return on capital employed of 17%.
If the new project were adopted, what would happen on investment and residual income.Answer is ROI decrease and RI decrease.
Could you please explain how the ROI and RI decrease.
(In the book, the explanation is a bit too complicated)Thanks.
1. Work study is simply studying how people work.
2. Because it is measuring growth in the number of units sold. (Growth in sales revenue would be a financial measure)
3. Since the new project gives a return less than the current ROI, the ROI will fall if the project is adopted.
Since the new project gives a return in excess of the cost of capital, the RI will increase if the project is adopted.
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