The Following Information Relates to the Operating Performance of Two

question 103

Essay

The following information relates to the operating performance of two divisions of Mega Electronics,Inc. ,for last year.

Required:
a.Compute the return on investment (ROI)of each division,using total assets at gross book value as the investment base.
b.Compute the ROI of each division,using total assets net of accumulated depreciation (net book value)as the investment base.
c.Which of the two measures do you think gives the better indication of operating performance? Explain your reasoning.

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Definitions:

Interest Payment

Interest Payment refers to the regular payment that a borrower makes to a lender for the use of borrowed money, typically part of the debt's service payments.

Cash Balance

The amount of cash a company has available at any given time, including currency, coins, and balances in checking and savings accounts.

Interest Payment

The amount paid by a borrower to a lender as compensation for the use of borrowed money.

Suppliers

Entities or individuals that provide goods or services to companies or other individuals, often playing a critical role in supply chains.