Lecture 6- Divisional performance measures

Decentralisation- Delegating to of organisation by management

In non-divisionalised organisations, organisation as whole is an & below this level there is consisting of centres & centres

In divisionalised organisations, organisation is divided into separate or & below this level there is consisting of centres & centres

Divisional economic performance can be influenced by many beyond of divisional managers. To evaluate performance of divisional managers, an attempt needs to made to between & performance

To evaluate performance of divisional manager only those items by them should be included in divisional financial measures. Therefore, this does not include of as they cannot be influenced by divisional managers

Return on investment (ROI)- Method of appraising where from project are divided into , also known as of & on

One advantage of return on investment is that it managers to focus on , & required to generate those

Another advantage of return on investment is that it can be used to relative performance of for business units of different

Third advantage of return on investment is that it promotes an of between , &

One disadvantage of return on investment is that it managers to focus on financial performance at expense of viability & competitiveness

Another disadvantage of return on investment is that it managers to asset replacement. They act in this way to maintain & show

Third disadvantage of return on investment is that it managers from in projects which are from point of view, but investment centre’s ROI

Residual income- less charge on investment by divisional manager

One advantage of residual income is that it takes account of organisation’s in measuring & therefore more likely to promote , compared to

Another advantage of residual income is that it investment in projects which yield to organisation

One disadvantage of residual income is that it is an monetary measure which means it is to compare performance of with that of other or companies of different , unlike ROI

Another disadvantage of residual income is that formula is in of businesses, unlike

Third disadvantage of residual income is that it can encourage /, as with

Economic value added- Refinement of measure that incorporates to divisional financial performance measure for introduced by generally accepted

One advantage of economic value added is that it removes that arise when
measuring based on

One disadvantage of economic value added is that it is an

To measure managerial performance only & should be included whereas to measure economic performance & should be included

Three approaches that can be used to reduce dysfunctional consequences of short-term financial measures are use of measures such as , performance measurement & focusing on both & measures using