Question

Question 1 3 pts The following table contains actual segment data for two of PepsiCo's geographic divisions: 1. Europe and 2. Asia, Middle East, and Africa (AMEA) Operating 2012 Data ($M) Sales Revenue Assets Income $1,330 $19,218 $13,441 Europe Asia, Middle East, and Africa $747 $5,738 $6,653 (AMEA) Requirements: 1. Compute each division's ROI. 2. Compute each division's sales margin. 3. Compute each division's capital turnover. 4. Comment on the results of the preceding calculations. 5. Compute each division's residual income, assuming upper management desires a 25% minimum rate of return.

Answer 1

ROI ROI =Operating Income /Assets Operating Income Assets ROI (a/b) Europe 1330 19218 6.92% Asia, Middle East & Africa 747 5738 13.02%

Sales Margin Sales Margin = Operating Income /Sales Europe Asia, Middle East & Africa Operating Income a b sales 1330 13441 9.90% 747 6653 11.23% Sales Margin (a/b)

3) Capital Turnover Capital Turnover = Sales / Assets Europe Asia, Middle East & Africa 13441 6653 а sales Assets Capital Turnover (a/b) 19218 0.70 5738 1.16

4) Comment The Asia, Middle East & Africa division has greater ROI, sales margin & capiatal turnover than Europe division which denotes that Asia, Middle East & Africa are more efficient than Europe division. 5) Residual Income Residual Income = Net Operating Income - (Minimum Required Return rate * Assets) Europe Asia, Middle East & Africa 747 Operating Income Assets Residual Income (a-b*25%) 1330 19218 -3474.5 5738 -687.5