201-Wk16a-Perf Eval-F'10 (STUD)

201-Wk16a-Perf Eval-F'10 (STUD) - Mgmt. 201 - Managerial...

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page 1 Mgmt. 201 - Managerial Accounting – Week 16a More Performance Evaluation measures ROI, RI and EVA Professor Thoman page 2 This is a short note on ROI, RI and EVA: Managers of a division are responsible for using the division’s capital (buildings and equipment) in a smart way so that the owners or shareholders get a good return on their capital investment. ROI (Return on Investment), RI (Residual Income), and EVA (Economic Value Added) are three measures of the return the manager is earning on the division’s investment.
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page 3 Performance measures for investment centers Return on Investment (ROI) = Income Invested capital = Income Sales revenue " # $ $ % x Sales revenue Invested capital " # $ $ $ % = Sales margin Capital turnover Return-on-sales Investment turnover What is the meaning of the Sales margin or the Return-on-sales ? What is the meaning of Capital turnover or Investment turnover ? page 4 Operations for AST Distributors’ three divisions for 2009 are: Division Assets Sales Divisional Income ROI Florida $3,500,000 $7,500,000 $1,050,000 0.30 Detroit 6,400,000 9,100,000 650,000 0.10 Dallas 5,500,000 9,500,000 1,200,000 0.22 The Florida Division performed the best while the Detroit Division shows the weakest
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This note was uploaded on 03/27/2012 for the course MGMT 201 taught by Professor Rowe during the Fall '08 term at Purdue University-West Lafayette.

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201-Wk16a-Perf Eval-F'10 (STUD) - Mgmt. 201 - Managerial...

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