Description of Performance Evaluation
ABC Company has two divisions, K and B, and a cost of capital of 12%. Information available:
Division K:
Revenue $200,000
Expenses 170,000
Invested Capital 100,000
Division B:
Revenue $250,000
Expenses 210,000
Invested Capital 150,000
A) Compute the following for each division: 1. ROI, 2. Return on Sales, 3. Capital Turnover, 4. Residual Income B) Which division is the better performer and why?