The Shamrock Corporation Manufactures Flower Pots in Canada and Ireland

question 155

Essay

The Shamrock Corporation manufactures flower pots in Canada and Ireland.The operations are organized as decentralized divisions.The following information is available for the year just ended:

The exchange rate at the time of Shamrock's investment (the end of the previous year)in Ireland was $1.35 Canadian to 1.00 Euro.During the year,the Euro weakened steadily in value and the exchange rate at the end of the current year was 1.24 Canadian = $1.00 Euro.The average exchange rate during the year was 1.28 Canadian = $1.00 Euro.
Required:
a.Calculate the Canadian Division's ROI for last year based on dollars.
b.Calculate the Irish Division's ROI for last year based on Euros.
c.Which of Shamrock's two divisions earned the better ROI? Explain your answer,complete with supporting calculations showing the Irish Division ROI in Canadian dollars.

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Definitions:

Vertical Analysis

A method of financial statement analysis in which each line item is listed as a percentage of a base figure within the statement, allowing for easy comparison and analysis of different-sized companies.

Cost Of Goods Sold

Costs directly linked to the creation of products sold by a company, including expenses for materials, labor, and overhead.

Horizontal Analysis

An analysis technique that evaluates trends over time by comparing financial statement line items or ratios across multiple periods.

Financial Statement Data

Information presented in financial statements, including the balance sheet, income statement, and cash flow statement, to inform users about a company's financial status.