Investment Center Performance - ROI

The video tutorial explains the concept of Return on Investment (ROI) and its significance in evaluating the performance of investment centers within an organization. It highlights that ROI is a key metric for assessing the profitability and efficient use of assets in investment centers. The tutorial also discusses the limitations of ROI in other responsibility centers focused on revenue generation or cost reduction. Two primary methods for calculating ROI are presented: using operating income divided by total assets, and multiplying profit margin by asset turnover. The video further elaborates on the components of profit margin and asset turnover, emphasizing their role in measuring asset efficiency in generating sales revenue.

What is the primary responsibility of an investment center?

What are the two primary methods of calculating ROI mentioned in the text?

How do you calculate ROI using operating income and total assets?

Explain the concept of profit margin and its role in calculating ROI.

What is asset turnover and how does it relate to ROI?