Ratios are used for many purposes; performance measurement is one such application. However, not all performance measures are expressed as a ratio. Do some research on the Internet to learn about operating leverage, ROI, EVA, RI. You will note that there are variations in the computations of a particular measurement. Consistency in application is the key.
Use information from the latest financial statement for Caribou Coffee or Starbucks to compute the measuements you researched.
Reflect on the advantages and disadvantages of these performance measures. Choose your preferred measure and explain your rationale.
ROI= (net xxxxxxx investment)* 100
xxxxxxx (1383800/575900)*100= 240.28%
EVA= xxxxxxx xxxxxxx k)= xxxxxxx (8%* 5109000)= xxxxxxx 408720= 975080
Operating xxxxxxx contribution/ xxxxxxx xxxxxxx 7,486,200/ 1383800 xxxxxxx 5.41
Residual income= xxxxxxx income – xxxxxxx charge
Equity charge= xxxxxxx capital * xxxxxxx of equity xxxxxxx xxxxxxx 8%= xxxxxxx income= 1383800- xxxxxxx 975080
Advantages and xxxxxxx of xxxxxxx xxxxxxx style="list-style-type:circle;">
Residual income xxxxxxx more flexible xxxxxxx a different xxxxxxx of capital xxxxxxx be applied xxxxxxx investments with xxxxxxx xxxxxxx characteristics. xxxxxxx takes a xxxxxxx effort to xxxxxxx leverage: xxxxxxx xxxxxxx company possesses xxxxxxx high degree xxxxxxx operating leverage, xxxxxxx success or xxxxxxx often depends xxxxxxx the volume xxxxxxx xxxxxxx The xxxxxxx of sales xxxxxxx often become xxxxxxx key xxxxxxx xxxxxxx the success xxxxxxx the business. xxxxxxx reason is xxxxxxx to see: xxxxxxx small gain xxxxxxx sales will xxxxxxx xxxxxxx a xxxxxxx large change xxxxxxx EBIT (or xxxxxxx income), xxxxxxx xxxxxxx small decrease xxxxxxx sales will xxxxxxx to a xxxxxxx decrease in xxxxxxx This high xxxxxxx of magnification xxxxxxx xxxxxxx importance xxxxxxx making sure xxxxxxx sales increase xxxxxxx than xxxxxxx xxxxxxx for companies xxxxxxx high degrees xxxxxxx operating leverage, xxxxxxx in sales xxxxxxx determine the xxxxxxx or failure xxxxxxx xxxxxxx business. xxxxxxx that reason, xxxxxxx with high xxxxxxx of xxxxxxx xxxxxxx will do xxxxxxx is possible xxxxxxx maintain their xxxxxxx share (e.g., xxxxxxx competitors' lowest xxxxxxx increasing marketing xxxxxxx xxxxxxx helps xxxxxxx monitoring problem xxxxxxx and providing xxxxxxx actions. xxxxxxx xxxxxxx helps in xxxxxxx the corporate xxxxxxx of the xxxxxxx since a xxxxxxx EVA implies xxxxxxx bonuses to xxxxxxx xxxxxxx In xxxxxxx they will xxxxxxx working hard xxxxxxx also xxxxxxx xxxxxxx EVA is xxxxxxx on the xxxxxxx that business xxxxxxx cover both xxxxxxx costs and xxxxxxx costs hence xxxxxxx xxxxxxx a xxxxxxx and true xxxxxxx of the xxxxxxx to xxxxxxx xxxxxxx EVA does xxxxxxx take into xxxxxxx inflation. Hence xxxxxxx somehow distorts xxxxxxx picture of xxxxxxx company’s financial xxxxxxx xxxxxxx investment xxxxxxx simple to xxxxxxx and is xxxxxxx to xxxxxxx xxxxxxx does not xxxxxxx into multiyear xxxxxxx flows discounting xxxxxxx ROI encourages xxxxxxx to focus xxxxxxx earnings in xxxxxxx xxxxxxx assets xxxxxxx Investors by xxxxxxx at the xxxxxxx shall xxxxxxx xxxxxxx the amount xxxxxxx return the xxxxxxx has been xxxxxxx to generate.
In the xxxxxxx case of xxxxxxx xxxxxxx true xxxxxxx can be xxxxxxx understood by xxxxxxx ROI xxxxxxx xxxxxxx a clear xxxxxxx of the xxxxxxx generated by xxxxxxx employed capital. xxxxxxx in turns xxxxxxx in evaluating xxxxxxx xxxxxxx project xxxxxxx Hence it xxxxxxx a fairer xxxxxxx of xxxxxxx xxxxxxx capital employed xxxxxxx a particular xxxxxxx and returns xxxxxxx out of xxxxxxx Thus the xxxxxxx can judge xxxxxxx xxxxxxx capital xxxxxxx on the xxxxxxx is fetching xxxxxxx expected xxxxxxx xxxxxxx not. Hence xxxxxxx my opinion xxxxxxx is the xxxxxxx measure among xxxxxxx the four xxxxxxx measures as xxxxxxx