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INTRODUCTION
In some business units, the main focus is on
profit. In other business unit, profit is
compared with the assets employed.
In real world, companies use the term profit
centre rather than investment centre. But, an
investment centre is special type of profit
centre, rather than a separate, parallel
category.
However, there are so many problems
involved in measuring the assets employed in
a profit centre.
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Additional Consierations in
Evaluating Managers
We strongly advocate the use of EVA as a performance
measurentment tools. EVA however does not solve all the
problems of measuring profitability in an investment
center.
More assets may be undervalued when are
capitalized, and others when are expense. This situation
applies especially to marketing units.
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