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In: Accounting

Suppose you have to choose only one method to evaluate the performance of the segments of...

Suppose you have to choose only one method to evaluate the performance of the segments of a company, what method would you use and why?: the rate of return on investment, the balanced scorecard or the Economic Added Value

Solutions

Expert Solution

To evaluate the performance of the segments of company, the most appropriate method out of Return on investment, Balanced Scorecard and Economic value added , is Balanced Scorecard. Reasons for using Balanced Scorecard method are -

1. Balanced Scorecard approach considers four perspectives for evaluation -

(a). Financial perspective

(b). Internal business process perspective

(c). Customer Relations perspective

(d). Learning and growth perspective

Whereas Return on investment and Economic value added focuses only on financial perspective. So to gain overall understanding of a business segment, Balanced Scorecard is better.

2 For the purpose of strategic planning of a business segment, Balanced Scorecard proves to be a great tool as it encompasses all the areas of a segment.

3. Balanced Scorecard helps in communication between different business segments regarding their strategies.

4. Balanced Scorecard focuses on long term goals rather than short term objectives.

ekkarill92 answered 2 years ago
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