Diffrence between ROCE and RI, Strategic Management

Assignment Help:

Q. Diffrence between ROCE and RI?

Both ROCE and RI are good measures to use when assessing financial performance, since both consider the capital invested, as well as the profitability of each division. A number of difficulties experienced if considering an approach of performance measurement grounded on either RI or ROI could be as follows.

-  Divisions within a group may use different currencies and these can fluctuate from one day to another.  The difficulty in these circumstances is that different accounting conventions cause differences in profit and capital employed when trying to compare different divisions.   Both ROI and RI concentrate on the maximisation of profit not cash...  Profit can be manipulated by a manager's choice over accounting policies they use.  

-  The controllability principle is concerned with assessing performance based upon measures that can be controlled only by a manager and omitting any items which are uncontrollable.  Political arguments may occur over such costs which are more subjective than objective when determining controllability.

-  The period of investment cycle for each division can distort performance comparisons e.g. divisions almost near to replacing worn out plant and equipment, may  have low capital employed and  therefore a  high ROI relative to other divisions, but earning only modest profit.


Related Discussions:- Diffrence between ROCE and RI

astro line, (A)    What is the optimal solution, i.e., how many units of e...

(A)    What is the optimal solution, i.e., how many units of every watch should be formed to maximize daily profits and how much daily profit will the company create? (B)    How m

Restructuring, What is the difference between restructuring, Reengineering ...

What is the difference between restructuring, Reengineering and Development

Diffusion is, The amount and pace of market adoption.

The amount and pace of market adoption.

Discuss the main categories of the matrix, Question: (a) ‘Many organi...

Question: (a) ‘Many organisations are using the internet a tool for survival. Digital firms require new organisational designs and management processes'. Explain how the Por

Show the demerits of using return on investment, Q. Show the Demerits of us...

Q. Show the Demerits of using return on investment? The following disadvantages maybe experienced when choosing to use ROI as a primary performance measure. -  An accounting

Explain performance ratios - return on capital employed, Q. Explain Perform...

Q. Explain Performance ratios - Return on capital employed? Return on capital employed (ROCE)    = (Profit before interest and tax (PBIT) / Capital employed) x 100%     The

Tools to influence social control, Tools to influence social control ...

Tools to influence social control Mission statements for example purpose and goals promoted. Reward for example linking remuneration with performance. Punishment

Discuss the pertinence and relevance of the ansoff matrix, Question 1: ...

Question 1: (i) Why should stategic issues involve all stakeholders for a product or/and service? (ii) What are the objectives of strategic formulation and implementation

Break-even point in dollar, You are considering shortly opening a copier se...

You are considering shortly opening a copier serving center near a university.  Your estimate of fixed cost is at $15,000 a year and the variable cost for every copy made is $0.01.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd