Investment Center


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.

BREAKING DOWN '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.

  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. Residual Income

    The amount of income that an individual has after all personal ...
  5. Hurdle Rate

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

    The minimum annual percentage earned by an investment that will ...
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  1. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  2. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  3. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>
  4. What does high working capital say about a company's financial prospects?

    If a company has high working capital, it has more than enough liquid funds to meet its short-term obligations. Working capital, ... Read Full Answer >>
  5. How can working capital affect a company's finances?

    Working capital, or total current assets minus total current liabilities, can affect a company's longer-term investment effectiveness ... Read Full Answer >>
  6. What can working capital be used for?

    Working capital is used to cover all of a company's short-term expenses, including inventory, payments on short-term debt ... Read Full Answer >>

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