Business unit and divisional performance measurement

Accounting information is widely used in reporting upon the performance of business units within a large organization. It often forms the major source of quantitative information available to senior managers. Yet it is, of itself, incomplete and inadequate in some respects. This means it is necessary to supplement accounting performance measures with other performance indicators, and to use and interpret the accounting information with considerable care. It also means that it is important to use the best available accounting techniques and to match these appropriately to the circumstances in which they will be used. In this text, Mahmoud Ezzamel sets out the underlying assumptions that are made in devising the most commonly used measures of business unit performance and analyzes the strengths and weaknesses of various approaches. A more radical approach involvinbg the use of DCF-based measures is advanced and he also considers how accounting information can be usefully supplemented by other sources of information, particularly in the context of the divisionalized organization.