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Managerial Accounting for Subsidiaries

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The following data summarize the operating performance of your company's wholly owned Canadian subsidiary for 2009 to 2011. The cost of capital for this subsidiary is 10 percent.

(000,000)
2009 2010 2011
Subsidiary Net Income $14.0 $14.3 $14.4
Total Assets in Subsidiary 125 130 135
Return on Net Investment* in Subsidiary 20% 22% 24%

* Net Investment is calculated as total assets less all liabilities

Required: Critically evaluate the performance of this subsidiary.

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The expert examines managerial accounting for subsidiaries.

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In general, one factor to determine the performance is to look at the ROI, the return on net investment. The greater the ROI, ...

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