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Measuring divisional profitability

  • Colin Drury

Abstract

After studying this chapter, you should be able to:
  • distinguish between functional and divisionalized organizational structures;

  • explain the factors that should be considered in designing performance measures for evaluating divisional managers;

  • explain why it is preferable to distinguish between managerial and economic performance;

  • distinguish between return on investment and residual income;

  • calculate controllable residual income;

  • illustrate how performance measures may conflict with the net present value decision model;

  • justify the use of a risk-adjusted discount rate for evaluating divisional projects;

  • explain why it is important to include additional non-financial measures in divisional performance reports.

Keywords

Cash Flow Residual Income Divisional Performance Goal Congruence Investment Centre 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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References and Further Reading

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Copyright information

© J.C. Drury 1992

Authors and Affiliations

  • Colin Drury
    • 1
  1. 1.Huddersfield PolytechnicUK

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