COMM 294 Lecture Notes - Lecture 22: Earnings Before Interest And Taxes, Profit Center, Opportunity Cost
Document Summary
Reporting for control (chapter 11): roi and ri. Evaluation using accounting measures. Good accounting measures promote: achievement of organization goals, management effectiveness & autonomy, goal congruence. Target values for performance measures. We consider two different accounting measures: return on investment (roi) = Income: residual income = Income ( Note: income , invested capital and cost of capital need to be defined. Decision in uencingdecision facilitatingaligning the goals of individuals and the organizationgetting all workers to work in the same directionfacilitating feedbackdecision in uencinghow high that measure should bepolicy / rulee. g. sauder set passing grade of 60. 60 is a hurdle rate. capital chargeneed to make sure what these terms meane. g. net operating income after taxes = $ * (1-tax rate)reporting for control (chapter 11): roi and ri. For responsibility centres (profit centres & investment centres) Income is generally operating income: often earnings before interest and taxes (ebit) Invested capital is generally operating assets.
