Investment centre
An investment centre is a responsibility unit whose manager influences profit and the investment in assets or capital supporting it. Performance can therefore be assessed using measures such as return on investment and residual income, alongside non-financial indicators. Ensure the profit and asset measures cover the same activities and distinguish controllable investment from assets imposed centrally. A ratio may reward rejecting worthwhile projects when it is used without considering organisational goals.
Worked example
A division earns $200,000 on an asset base of $1 million, giving ROI of 20%. Assess a new project against its required return as well as its effect on that existing ratio.
Common mistake
A project below the division’s current ROI can still create value if it exceeds the organisation’s required return.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| ACCA | PM | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |