Return on Investment

As I explain in my free lectures, the controllable profit is the profit calculated using only expenses that are controlled by the divisional manager (not including those expenses that are fixed by the head office). As far as the capital employed is concerned, unless the question specifies which capital employed to use the examiner prefers using the opening capital. If it asks for the average to be used then it is half-way between the opening and closing (i.e. (opening + closing)/2) ). Is it asks you to use the closing capital (or if that is the only figure available), then it is the closing capital (not half of it, which would make no sense :-) ).

ROI can be calculated using both formulae depending upon the requirement of the question (like this). ROI = (Controllable Profit / Capital Investment) x 100 ROI = (Controllable PBIT / Avg Capital Employed) x 100 This is the way controllable profit is calculated in the profit statement. Controllable sales revenue less: controllable costs Gross Profit less: controllable expenses Controllable Profit less: costs controlled by head office Net Profit All the depreciation cost and others costs controlled by the head office is deducted from the controllable profit to get the net profit?

That is all correct.