The profitability of an investment centre can best be evaluated by:
A) the revenues, costs and investment the manager can control.
B) the total capital invested in the organisation and the sizeable amount of return.
C) the profit margin and the investment capital traceable to the investment centre.
D) the divisional contribution margin.

Question

Quizplus · Accepted Answer

The profitability of an investment centre can best be evaluated by considering the profit margin and the investment capital traceable to the investment centre. This allows for the assessment of the centre's ability to generate profit relative to the capital invested in it. Option A is partially correct but does not account for the investment made. Option B is not accurate since total capital invested may not necessarily correspond to the investment made in the particular centre. Option D is not comprehensive enough as it only considers the contribution margin.

The Profitability of an Investment Centre Can Best Be Evaluated