How do you evaluate an operating segment or project using return on investment? How do you...

How do you evaluate an operating segment or project using return on investment?

How do you evaluate an operating segment or project using residual income and economic value added?

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Return on investment means the income that you gain on the total invest that you invest on a particular operating segment or project.The high the return on investment the good the performance of operating segment or project.The low the return on investment the worst peformance of the segments.Thus it helps to know whether the segments performance is as intended or less/high than what intended and taking necessary decisions like whether to further invest or divest or harvest a segment.

The residual income refers to long term benefits that the company gain even after the organisation stops doing an activities like royalties etc and economic value added refers to the excess income received from an organization that what needed by shareholders.The evaluations is done as what is the benefits that we receive after completion of projects or excess benefits that we receive than intended and should be high and it helps in choosing project or segment that which would receive more benefit than all the projects or segment that receive required Return on Investment.

ekkarill92 answered 1 year ago

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