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Corporate Basics

What is an Investment Center?

An investment center is an almost autonomous division of a company whose purpose is to generate returns on invested money.

Cost center and profit center are terms used for various kinds of business divisions when observed from a solely financial, instead of operational, standpoint. These categories help a business to identify and group its similar assets for evaluation. A cost center can be turned into a profit center if it manages to reduce costs enough to generate a profit.

An investment center is a part of the business which operates virtually autonomously under the direction of an investment manager. While cost and profit centers were only concerned with current cash-flow in terms of costs and revenues, the investment center is also evaluated in terms of initial capital investment, such that the manager’s primary objective is to generate return on investment (ROI).

Unlike retail investment managers, the managers at an investment center are only concerned with pleasing one client: the corporation to which they belong. They act in a fiduciary capacity to manage the assets of the company without having to get approval prior to taking action.

This is called having agency, and a corporation’s board of directors can endow a manager with authority and agency to permit them to act on the company’s behalf without having to ask permission before acting.

What is an Investment Club?
What is an Investment Manager?

Keywords: investment, corporate finance, board of directors, return on investment (ROI),