Difference between an investment center and a profit center/ Managerial Economics
The Jameson Company has recently formed a subsidiary, Bright Ideas, to manufacture and sell household appliances.
a. What is the difference between an investment center and a profit center?
b. What factors should Jameson consider in deciding whether to evaluate Bright Ideas as a profit or investment center?
Many large firms have no feasible alternative to organizing as publicly traded corpora- tions, some smaller firms have chosen to “go private” and convert to closely held com- panies. Others have delayed going public. While the evidence is controversial, it generally supports the notion that the costs of SOX have been significant, while the benefits have been elusive.
The debate on how to improve corporate governance continues in the aftermath of the 2001-2002 corporate scandals. This debate is useful since it could lead to new insights into how to improve corporate governance. Nevertheless, it is impor- tant to recognize that corporate governance is not as flawed as some critics con- tend. While improvements in governance are conceptually possible, it is critical to consider both the costs and benefits when evaluating governance changes at either the firm or regulatory level.
