By using the return on investment as a divisional performance measure, divisional managers will always be motivated to invest in proposals that will increase the overall return for the company.

Return On Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the net profit from the investment by its original cost.

Divisional Performance

Assessment of the financial and operational effectiveness of a distinct business unit within a larger corporation, often reviewed to make strategic improvements.