Investment Center

AAA

DEFINITION of 'Investment Center'

A business unit that can utilize capital to directly contribute to a company's profitability. Companies evaluate the performance of an investment center according to the revenues it brings in through investments in capital assets compared to the overall expenses.


An investment center is sometimes called an investment division.

INVESTOPEDIA EXPLAINS 'Investment Center'

An investment center is different than a cost center, which indirectly adds profit and is evaluated according to the money it takes to operate. Moreover, unlike a profit center, investment centers can utilize capital in order to purchase other assets. Because of this complexity, companies have to use a variety of metrics, including return on investment (ROI), residual income and economic value added (EVA) to evaluate performance.

RELATED TERMS
  1. Return On Investment - ROI

    A performance measure used to evaluate the efficiency of an investment ...
  2. Cost Center

    A department within an organization that does not directly add ...
  3. Economic Value Added - EVA

    A measure of a company's financial performance based on the residual ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required ...
  5. Required Rate Of Return - RRR

    The minimum annual percentage earned by an investment that will ...
  6. Residual Income

    The amount of income that an individual has after all personal ...
Related Articles
  1. How To Calculate Required Rate Of Return
    Forex Education

    How To Calculate Required Rate Of Return

  2. How To Choose The Best Stock Valuation ...
    Markets

    How To Choose The Best Stock Valuation ...

  3. All About EVA
    Options & Futures

    All About EVA

  4. The Impact Of Recession On Businesses
    Entrepreneurship

    The Impact Of Recession On Businesses

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center