Accounting › Section Y · Balanced scorecard and performance measures › Topic Y.2
Return on investment, residual income, and EVA
An investment centre manager controls assets as well as profit, so the measure must charge for the money tied up. Return on investment, residual income and economic value added each do this in a different way, with different side effects.
In this topic
- Measuring an investment centre
- Return on investment
- Margin times turnover
- Worked example: Fennick's two divisions
- Raising ROI, and the traps
- ROI can reject good projects
- Residual income
- Economic value added
- Worked example: Fennick's EVA
- Common mistakes to avoid
- Key takeaways
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