Misevaluation of Investment Center Performance.

This article discusses the problem of evaluating financial performance of investment centers. In order to employ an investment center concept, a company must have decentralized its profit responsibility. A company with decentralized profit responsibility is one that is divided into autonomous units, where each of which is accountable to top management for some measure of its profit. With the wider use of investment centers, more and more companies will establish internal accounting procedures based on the needs of an internal performance evaluation system.