Segment Reporting and ROI

1
Chapter 12

• Segment Reporting and ROI

2
Segment Reporting

• Centralization
• Decentralization
• Pros and Cons

3
Responsibility Centers

• Cost Center
• Profit Center
• Investment Center

4
Segment Reports

• Segment reports Any part or activity of a
  company.
• Cost
• Revenue
• Profit
• Segment margin Segments contribution margin
  less traceable fixed costs .
• Traceable costs
• Common costs
• Dangers in allocating common costs
• Pr. 12-14 page 568

5
Return on Investment

• Net operating income (EBIT)
• Earnings before interest and tax expense
• Average operating assets
• Assets held for productive use such as cash,
  A/R, inventory, PP E, prepaids.
• Does not include assets held for investments

6
Return on Investment

• Profit Margin X Asset Turnover
• Net operating income X ____Sales______
• Sales Ave. operating assets
• Or
• Net operating income
• Ave. operating assets

7
Coach Keen Says.

• Reread pages 526-548
• Do all Chapter 12 homework, 1, 5, 6, 7, 17
• Rework all problems done in class
• Read Chapter 13
• Do homework 13-1 13-2
• Problem 12-18 page 571