Business Finance Homework Help

Performance Measurement

Isis James 

Discussion 1

A company owns two identical apartment buildings.

• Both buildings were built at the same time.
• The first building was acquired by the company ten years ago.
• The second building was acquired by the company two years ago at a higher price.
• The net book value of the first building will be much lower than the net book value of the second building due to accumulated depreciation and a lower purchase price.
• Each building has a different manager.

Discuss how to measure the ROIs so that the manager of the older building does not show a much higher ROI, even if actual job performance is worse in terms of keeping the units rented and containing maintenance costs. 

     ROI (Return on Investment) is a performance measure used to evaluate the effectiveness of a businesses investment or to evaluate the efficiency of that investment (Marshall et al., 2020). ROI goal is to directly measure the amount of return on a particular investment, in relation to the investment’s costs.

    Return on investment (ROI) is a financial ratio used to calculate the benefit an investor will receive in relation to their investment cost. It is most commonly measured as net income divided by the original capital cost of the investment (Marshall et al., 2020). The higher the ratio, the greater the benefit earned.
ROI Formula- Investment gain (Net Income) / Cost of Investment (Total Assets) = X%
The Net Income comes from the income statement and Total Assets come from the balance sheet.
    In conjunction within the ROI you need to incorporate the NPV (Net Present Value) which accounts for differences in the value of money over time due to inflation, for even more precise ROI calculations (Johnson, 2010). The application of NPV when calculating the rate of return is often called the real rate of return (Johnson, 2010).

    Even though both buildings were built at the same time the first building has a lower net book value due to lower purchase price and depreciation. In most instances the ROI is higher when the cost of investment is lower. So, the older building would have the higher ROI. The difference in managers is irrelevant. The manager of the older building would still have a higher return on investment even if his/her performance as a manager is poor.

Isis James

References

 Johnson, N. B. (2010). Residual income compensation plans and deferred taxes. Journal of Management Accounting Research, 22(2010), 103–114

Marshall, D., McManus, W., & Viele, D. (2020). Accounting: What the numbers mean (12th ed.). New York, NY: McGraw-Hill. 

Randy Johnson 

Discussion 1

Return on investment (ROI) is a performance measure used to evaluate the return on an investment relative to the cost of the investment and tells how good an investment brings in profit to the investor. According to Investopedia, ROI is an accounting term that indicates the percentage of invested money that’s recouped after deducting associated costs (Marc, 2020). The formula for calculating ROI is not complex; hence easy to calculate since it simply states that ROI = (Investment gain – Investment cost) / (Investment cost). The return of an investment is divided by its cost, and the result is expressed as a percentage or ratio.

The managers should consider other variables in the calculation, including the maintenance/repair expenses and the amount of money borrowed to pay for the initial investment, which is the leverage incorporated in the interest. Under most circumstances, the ROI is higher when the cost of the investment is lower. The cost of the buildings will contain the initial purchase price, and hence upon the sale at a future date, any gains or loss on the sale is based on the difference between the building’s net carrying value and the market sales price. ROI is reduced upon the payment of loan fees or a refinanced loan or whenever there is an increase in property taxes, depreciation, utility rates, and maintenance costs that the company pays for in the form of expenses.

The cost method involves calculating the ROI as (Equity) / (All costs). It takes all costs, including the purchase, repairs, and rehabilitation of the property. The equity is obtained after subtracting all costs given as the {value of the asset, say the buildings – (the purchase cost + additional costs including depreciation)}. The company could prefer the managers to use the out of pocket method in the calculation since it constitutes a higher ROI. The leverage increases the ROI. The managers are also expected to consider the maintenance costs and the units rented since they indicate the gains from both the buildings, which may differ.

Reference

Marc Davis. (2020, August 31). How to find your return on investment (ROI) in real estate.         Retrieved from https://www.investopedia.com/articles/basics/11/calculate-roi-real-estate-       investments.asp

Ethics and ROI

Randy Johnson 

Discussion 2

Research ethics is one of the oldest fields that have existed for decades. Business ethics is a relatively diverse field and differs across industries. Academics in the business field use science-based models and explain the ethical behavior of a business (Robin, 2009). The purpose of business ethics is to enforce good business relations with all business stakeholders such as the government, business customers, employees and suppliers. High levels of prevalence of capitalism have been witnessed over years which have threatened the most basic societal norms and code of conduct. The motivation of capitalists is profit maximization and should be regulated to facilitate ethical decision-making that does not affect the community’s welfare.

Return on investment is an important financial metric used in the measurement of the profitability of a firm. An organization should make appropriate decisions concerning the operations of the different managers (Robin, 2009). The decision-making panel should consider the different implications of the different assets in the decision-making process. Older assets are likely to have lower yields which do not mean that the manager is poorly performing. Employment of a new manager who is likely to improve the financial position of the organization.

Many stakeholders rely on the organization to make the right decision concerning the operations of the organization. Investors rely on the division managers to make decisions that will improve the welfare of all the stakeholders (Robin, 2009). It is the role of the manager to identify the talents and abilities of the different employees and make appropriate decisions that will ensure maximum productivity of the organization. Direct interaction with stakeholders of an organization presents an opportunity to analyze the employees’ abilities and assign them the most suitable posts depending on their abilities. Management should communicate to the employees the reasons behind the allocation of duties to foster good relations.

Reference

Robin, D. (2009). Toward an applied meaning for ethics in business. Journal of business ethics, 89(1), 139-150.

Daphane Terry 

Discussion 2

I am the division manager of a company with four departments. The company evaluates department managers on the basis of return on investment (ROI), with investment measured by net book value (that is, original cost minus depreciation). I have a favorite person who I want to put in a place where she can achieve a high ROI. I know if she is the manager of the older division, where the net book value is low, it will seem as if she achieves a high ROI. Ethically, this is the wrong way to reward a company’s performance. Ethics is defined as acting to prevent substantial harm to others when individuals have an opportunity to do so for their own benefit ( Robin,2009) . In other words, if she looks good I will look good in the eyes of the owners.

The performance of the potential candidate which is determined by the ROI should not be the deciding factor. The moral decision to promote or not must involve selfless actions. Managers are supposed to operate as agents of the stockholders ( Robin,2009) . Abuse of power is the driver of unethical behavior ( Robin, 2009). I can continue to demonstrate my value with knowledge, fairness, and respect for people. Conducting strategic business relationships with the goal of growth in economic welfare will better be strengthened with ethics and morality in order to capitalize on profit. 

Reference:

• Robin, D. (2009). Toward an applied meaning for ethics in business. Journal of Business Ethics, 89(1), 139–150.

Inferential Statistical Methods Using Excel

Timothy Adams 

Discussion 6 new

The InterContental Group

The origins of this business can be traced back to 1777, when William Bass established theBass Brewery in Burton-upon-Trent. (ihgplc 2019) In 1875, its red triangle logo was the firstever trademark registered in the United Kingdom. (ihgplc 2019) The company later changed its name and, in 1969, Bass Charrington, as it was known at the time, launched the Crest Hotel chain, marking its first entry into the lodging sector. (ihgplc 2019) Bass purchased the Holiday Inn hotel chain in 1991. (ihgplc 2019) After separating from the brewery business Bass created the InterContinental Hotel group (IHG) which became a discrete company on April 15, 2003. (ihgplc,2019) InterContinental Hotel Group owns, manages, franchises, and leases hotels in the Americas, Europe, Asia, the Middle East, Africa, and China. (Simply Wall ST, 2021) As of December 31, 2020. the company has five thousand nine hundred sixty-four  hotels and eight hundred and eighty-six thousand thirty-six  rooms in one hundred countries. InterContinental Hotels Group is headquartered in Denham, the United Kingdom. (Simply Wall ST, 2021)  IHG’s mission is to become the greatest company in the world through creating great hotels guest love. (Simply Wall St, 2021) IHG’s road map for growth is dependent on engagement and high performance from the entire workforce. (Simply Wall ST, 2021) IHG holds a ranking number 4 out of the top five hotel companies in the world. (Hospitality on 2021) IHG has twelve thousand eight hundred thirty-two employees. (Hospitality on 2021) The company’s current competitors are Whitbread, Airbnb, Booking Holdings, and Marriott International. (Simply Wall ST, 2021)

Graphical Representations of Data

Interpreting the Scatterplots

Figure 1.1. Scatterplot of highest prices of IHG based on data from Yahoo Finance (2021)

 Figure 1.1 shows the trend of the highest stock prices of IHG from November 13, 2020, to

November 13, 2021. This graph explains the relationship between two variables:

highest stock prices (in U.S. dollars) on the y-axis, which is the dependent variable, and time

(in days) on the x-axis, which is the independent variable. The scatterplot is linear: The highest

stock prices show a positive relationship with time in 2020.

The graph was achieved by highlighting the date and the high price columns on the data

spreadsheet Once that was established using the toolbar in excel at the top clicked on the insert

button to reveal charts then clicked on the scatterplot icon. Proceeded to add labels for the

variables shown, adjusted chart so information could be easily read and understood. Once the

chart icon is selected you can follow the steps that Excel highlights automatically and adjust your

chart to size, color, text type, and graph type.

Interpreting the Scatterplots

Figure 1.2. Scatterplot of lowest stock price of IHG based on data from Yahoo Finance (2021)

 Figure 1.2 shows the trends in IHG’s lowest stock prices from November 13, 2020, to

November 13, 2021. This graph explains the relationship between two variables:

lowest stock prices (in U.S. dollars) on the y-axis, which is the dependent variable, and time

(in days) on the x-axis, which is the independent variable. The scatterplot is linear: the lowest

variable in stock prices show a positive relationship with time in 2020. Even though IHG went

through a  worldwide pandemic the variables with the low prices sustained without significant

downtrend of stock prices, this is due to the fact IHG (and most hotel groups) had to

re-invent itself during the crisis. (Forbes 2021) The graph was achieved by highlighting the date

and the high price columns on the data spreadsheet Once that was established using the toolbar in

excel at the top clicked on the insert button to reveal charts then clicked on the scatterplot icon.

Proceeded to add labels for the variables shown, adjusted chart so information could be easily

read and understood. Once the chart icon is selected you can follow the steps that Excel

highlights automatically and adjust your chart to size, color, text type, and graph type.

Interperting the Histograms

Figure 2.1 Histogram of adjusted closing stock prices of IHG based on data from Yahoo Finance (2021)

 The graph was completed by using the data from Yahoo Finance and selecting the date. Using

Microsoft excel the graph was created by highlighting the data in question on the excel sheet

in this case it is the adjusted daily closing, this is data that is taken for IHG. Once the column for

adjusted daily closing price was highlighted the insert button for histogram is clicked on and

the graph is adjusted. Bin range was calculated, and it was done manually and automatically

this was done through the axis options function, overflow bin and underflow bin were calculated

and inserted to give the information that is demonstrated on the graph. There was also a legend

installed to show the number of adjusted closes at a particular range in price. After bin

information was calculated and adjusted the series options was used to adjust the information

bars to show distinction between groups of occurrences. The bin calculations are done by finding

the difference between highest and lowest of the highest and the lowest. The automatic

use of excel will show you the differences also when the bin information is highlighted and

then using the axis functions in Excel.

Interpreting the Histograms

Figure 2.2 Histogram of stock volume of IHG based on data from Yahoo Finance (2021)

The graph was completed by using the data from Yahoo Finance and selecting the date. Using

Microsoft excel the graph was created by highlighting the data in question on the excel sheet

in this case it is the stock trading volume, this is data that is taken for IHG. Once the column for

volume was highlighted the insert button for histogram is clicked on and

the graph is adjusted. Bin range was calculated, and it was done manually and automatically

this was done through the axis options function, overflow bin and underflow bin were calculated

and inserted to give the information that is demonstrated on the graph. There was also a legend

installed to show the amount of volume at a particular date range in days. After bin

information was calculated and adjusted the series options was used to adjust the information

bars to show distinction between groups of occurrences. The bin calculations are done by finding

the difference between highest and lowest of the highest and the lowest. The automatic

use of excel will show you the differences also when the bin information is highlighted and

then using the axis functions in Excel.

This is picture presentation of what was just described. 

 Timothy 4.docx (90.188 KB) 

Denise Barnes 

Inferential Statistical Methods Using Excel Discussion Resources

McDonald’s is the company I chose to report on,  McDonald’s is one of the world’s great brands, operating nearly 40,000 restaurants, they offer 40,000 community centers that create opportunities, connection and support networks for tens of millions of people every day (Annual Report.com, 2020) Effective January 1, 2019, McDonald’s operates under an organizational structure, the reporting segments of McDonald’s are aligned with its strategic priorities to show how management reviews and evaluates operating performance (Annual Report.com, 2020)

What I did to get this scatterplot was to go to yahoo finance, enter the company that I wish to report on, in this case McDonald’s. I then searched and clicked on McDonald’s, then clicked on the historical data tab, that took me to the time period, where it was suggested to use the 5 years, and to show historical prices with a daily frequency. I then clicked apply, giving the system time to apply request, I then clicked download, which downloaded a csv spreadsheet that opened up to an excel spreadsheet. Once opened, I highlighted the column named high, and held the control button down to highlight the time. I then clicked the insert button to get to the suggested scatterplot to use for this project. It gave me the scatterplot graph needed, and I then renamed the axis labels by clicking on the plus sign on the right side of the graph.

To create the histogram, I had to get the min and the max of the adjusted closing and then I had to click on the data tab, followed by the data analysis tab, that opened a box where I had to click on the histogram tool that opened up a box where I had to click in the input range, to highlight the adjusted closing tab to enter in the input range, and then I had to click in the bin box and highlight the bin range, I had to click the label box, and click the output button and click on where I wanted the information to display.

Annual Report.com. (2020). 2019 Annual Report. New York.

Lind, D. A. (2021). Basic Statistics for Business and Economics. McGraw-Hill Higher Education (US).

RE: Discussion 1 : Performance Measurement

REPLY TO: 

David,

I see that you have a strong belief that Building 1 has a bigger ROI than Building 2. I think it depends on the method of calculation. When you use the costing method, you may find that the value of Building one has depreciated over time to the extent that its ROI is lower than that of Building 2. The costing method incorporates all manner of variables like depreciation, market value etc.

Monique Ring PRIMARY INSTRUCTOR MANAGER

RE: Discussion 2 : Ethics and ROI

David

Are employee evaluations that are based upon a series of questions which you put in a range based upon 1 to 10; subjective? Can you avoid this?

Dr Ring

Denise Barnes

Inferential Statistical Methods Using Excel Discussion Resources

McDonald’s is the company I chose to report on, McDonald’s is one of the world’s great brands, operating nearly 40,000 restaurants, they offer 40,000 community centers that create opportunities, connection and support networks for tens of millions of people every day (Annual Report.com, 2020) Effective January 1, 2019, McDonald’s operates under an organizational structure, the reporting segments of McDonald’s are aligned with its strategic priorities to show how management reviews and evaluates operating performance (Annual Report.com, 2020)

What I did to get this scatterplot was to go to yahoo finance, enter the company that I wish to report on, in this case McDonald’s. I then searched and clicked on McDonald’s, then clicked on the historical data tab, that took me to the time period, where it was suggested to use the 5 years, and to show historical prices with a daily frequency. I then clicked apply, giving the system time to apply request, I then clicked download, which downloaded a csv spreadsheet that opened up to an excel spreadsheet. Once opened, I highlighted the column named high, and held the control button down to highlight the time. I then clicked the insert button to get to the suggested scatterplot to use for this project. It gave me the scatterplot graph needed, and I then renamed the axis labels by clicking on the plus sign on the right side of the graph.

To create the histogram, I had to get the min and the max of the adjusted closing and then I had to click on the data tab, followed by the data analysis tab, that opened a box where I had to click on the histogram tool that opened up a box where I had to click in the input range, to highlight the adjusted closing tab to enter in the input range, and then I had to click in the bin box and highlight the bin range, I had to click the label box, and click the output button and click on where I wanted the information to display.

Annual Report.com. (2020). 2019 Annual Report. New York.

Lind, D. A. (2021). Basic Statistics for Business and Economics. McGraw-Hill Higher Education (US).