Profit measurement in divisionalized companies

  • Robert W. Scapens


The recent debate on the role of residual income in the measurement of divisional performance seems to be far from settled. There has been much discussion about the validity of including an interest element in the income calculation. It has been suggested that divisional income measurement should include interest on capital employed (or at least, some part thereof) to ensure that divisional managers are encouraged to operate with the optimal capital resources [21, 24]. However, Amey [2] argued that it is theoretically erroneous to deduct interest in the appraisal of operating decisions. Some attempts have been made to reconcile the arguments of both sides to the debate [8, 22, 23], but without much success [1].


Cash Flow Adjustment Cost Shadow Price Capital Asset Marginal Revenue 
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Copyright information

© Springer Science+Business Media Dordrecht 1979

Authors and Affiliations

  • Robert W. Scapens
    • 1
  1. 1.University of ManchesterUK

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