Which of the following performance measures can be used to compare the performance of business segments of var

Question

Which of the following performance measures can be used to compare the performance of business segments of varying sizes?

1. Return on investment

2. Economic value added

Answer 1

Return on investment can be used for this comparison because it is a ratio. Each segment's ratio indicates its relative performance.

Economic value added is going to be a dollar amount, presumably the larger segments would add a greater economic value than smaller segments. But that wouldn't necessarily imply that the larger segments are performing better than the smaller segments.