Ch_11_solutions_new_

Ch_11_solutions_new_ - SOLUTIONS and CHECK FIGURES CHAPTER...

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Unformatted text preview: SOLUTIONS and CHECK FIGURES CHAPTER 11 (NEW EDITION) Note: Because the solution manual is not yet available for the new book, I had to prepare these myself. Rather than typing up all of my steps, I might only provide check figures if the solution is straightforward. Otherwise I wouldnt be able to finish this before the exam. 11-4 1. Revenue 2. Profit 3. Investment 4. Cost 5. Investment 6. Cost 11-6 a. Learning and growth b. Financial c. Customer or internal business d. Learning and growth e. Customer f. Internal business g. Customer or internal business h. Financial 11-7 a. Financial b. Customer c. Learning and growth d. Internal business (remember, innovation is internal business) e. Internal business f. Internal business g. Learning and growth h. Customer 11-9 Profitability depends on perspective. In terms of pure profit, International is more profitable ($10m versus $6m). However, in terms of investment, Domestic returns more profit per dollar invested ($6m/$20m = $0.30 versus $10m / $35m = $0.285). 11-10 1. Snow = 20% Non-snow = 24% 2. Non-snow; management generates more profit per dollar invested ($0.24 in non-snow versus $0.20 in snow). 3. No; the basic ROI equation does not offer insight into why one division is more profitable than another. We should decompose ROI into sales margin and capital turnover to learn more. 11-11 1. Snow = 16% Non-snow = 16% Both divisions earn $0.16 of profit per dollar of revenue. Therefore, the difference in ROI between divisions is not caused by the profitability of the products sold. 11-12 1. Snow = 1.25 Non-snow = 1.50 Each dollar of assets in the snow division was able to generate $1.25 of sales, while each dollar of assets in the non-snow division was able to generate $1.50 of sales. Therefore, the difference in ROI is due to the ability of non-snows invested assets to generate sales. In other words, once the sales are generated, each division is equally profitable (from prob. 11-11), but non-snow generates more sales. 2. Snow = 0.16*1.25 = 0.20 Non-snow = 0.16*1.50 = 0.24 Yes, the results agree. 11-13 Snow = $200,000 Non-snow = $540,000 Yes, results are consistent. Both divisions had positive residual income meaning that both divisions were earning more than 15% on their assets (i.e., managements desired rate of return). This positive RI is expected because we knew ROI was greater than 15% for both divisions (20% and 24%). 11-14 Snow = $82,000 Non-snow = $288,000 Both divisions had positive EVA indicating that both divisions were exceeding the desired rate of return for both shareholders and long-term creditors. 11-16 a. Profit b. Cost c. Revenue d. Cost e. Profit f. Investment g. Investment h. Cost i. Revenue j. Profit k. Investment (the problem is asking for the H&R Block parent corporation) 11-18 PerspectiveObjective KPI Goal Actual Met?...
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This note was uploaded on 10/08/2011 for the course ACCT 101 taught by Professor Kang during the Spring '08 term at S.F. State.

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Ch_11_solutions_new_ - SOLUTIONS and CHECK FIGURES CHAPTER...

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