Assume that next year Research in Motion sells off its interest in TIP Communica

Question

Assume that next year Research in Motion sells off its interest in TIP Communications (one of its subsidiaries). Forecasted information about the operations for RIM and TIP for that future fiscal year immediately prior to the proposed sale follows:

$Millions                                RIM                          TIP                    Total    

Revenues                             $20,943                     $1727                 $22,670

Operating Expenses             20,321                        1,971                  22,292

Does not include TIP results. Includes cost of goods sold

Required:

How do you comput the operating income? Can you please show the steps? How about for both? Can you please show the steps?

Explanation / Answer

1) Operating income

RIM = ( 20943 - 20321 ) = 622

TIP = ( 1727 - 1971 ) = -244

Total = 22670 - 22292 = 378

2) If the results are typical for TIP, it means that TIP is a loss making business and hence RIM decided to see off its interest in TIP

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