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Ayu Bhd (AB) sells varieties of muslimah veils that has a number of stores across...

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Accounting

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Ayu Bhd (AB) sells varieties of muslimah veils that has a number of stores across Peninsular Malaysia. The manager of the company is an ambitious person, and looking to expand her activities, by continuously adding the number of stores. The market of AB is increasing rapidly. The stores of the company, at an average, have a gross profit ratio of around 40%. AB assesses the performance of each of their stores individually. The expected return on investment (ROI) of AB is 10%. Some of the stores have been able to achieve an ROI above this target. Below is financial data given for two of AB's stores for the last year: Store C in Kuala Lumpur and Store D in Johor Bahru, yourself le feu Sales Gross Profit Net Profit Assets employed investment) Store C (RM'000) 1,720 724 150 1,170 Store D (RM'000) 1,350 570 100 720 Required: a) Discuss the past financial performance of Store C and Store D using: i. ROI (4 marks) ii. Gross Profit Ratio (4 marks) iii. Net Profit Ratio (4 marks) iv. Residual Income (5 marks) b) Discuss TWO (2) disadvantages of ROI as divisional performance measures (8 marks)

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