Q PG Exam Timetable T320 Final F, X I +:%207%20Tutortal%20SOLUTIONS%20Ch%20139620R01%20EVA%20(1).pdf5 / 6 — 100%± DJ ODACC702Working Exercise Traditional (Financial) Measures of Performance Pilot Corporation has established separate business units as investment centres and the manager’s performance is measured using financial measures. Bonuses of up to one third of the manager’s salaries are paid for achieving the targets as described below. The following is known about the Alpha Division’s results:Profit: $8 000 000 Sales revenue: $100 000 000 Invested Capital $50 000 000 Required:a) Calculate the Return on Investment (ROI) for the Alpha Division?ROI = Profit/Invested Capital = $8m / $50m = 0.16 i.e. 16%b) Assuming Sales Revenue is ‘fixed’ by market competition, use the two component ratios to demonstrate two ways the Alpha Division could improve ROI, increasing it to 18%. (Ensure you state the amount of cost cutting or capital reduction necessary and SHOW ALL WORKINGS and calculations supporting your answer.)If competition is hieh in this business then the manaeers will have little or no9 9 .
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