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Divisional Accounting

 

Return on Investment (ROI) %

 

= Net (Control) Profit / Net Assets

 

Residual Income (RI)

 

= Net (Control) Profit – (Interest X Net Assets)

 

 

Example

 

                                Charge 12% corporate resources

 

 

 

Div 1

Div 2

Div 3

Control Profit

100

240

95

Investment in net assets

350

850

300

 

Performance Measures

 

 

 

ROI

28.57%

28.23%

31.66%

Ranking

(2)

(3)

(1)

 

 

 

 

 

 

 

 

Control Profit

100

240

95

Inputted Interest 12% on Assets

42

102

36

RI

58

138

59

Ranking

(3)

(1)

(2)

 

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