In this chapter we will consider the situation where an organisation is divisionalised (or decentralised) and the importance of proper performance measurement in this situation. We will also consider the possible problems that can result from the use of certain standard performance measures.
The meaning of divisionalisation
As mentioned earlier, divisionalisation is the situation where managers of business areas are given a degree of autonomy over decision making i.e. they are given the authority to make decision without reference to senior management. In effect they are allowed to run their part of the business almost as though it were their own company.
Advantages of divisionalisation:
- Specialism in product/country/customer
- Greater motivation for managers
- Allows divisions to be profit centres (motivating and promotes efficiency)
- Allows performances between divisions to be compared
- Clearer objectives for managers (concentrate on one area of the business only)
- Usually accompanied by decentralization, so potentially better decisions.
Problems with divisionalisation:
- Coordination difficulties
- Requires transfer prices to be established
- Lack of goal congruence/dysfunctional decision-making
- Difficulties in ‘fair’ comparison of divisions.
- Potential duplication of some services
Hi in the video you mention that operating leases will not be on the balance sheet but this will no longer be the case with the new standard for leases right?
Hello
Could you please describe the annuity depreciation. I dont see how you came up with answer to 4c in chpt 11
thank you
See lecture 11A from a out time 19.30 onwards.
Here is some problem.
Year 1 capital is 750K, Year 2 capital is Year 1 capital – dep.
But Year 2 capital should plus Year 1 net income because Capital= equity+ long-term debt.
Thanks.
It depends with the rev. kit you are using, Kaplan, BPP etc. Which one are you using?
Thanks a lot for the lectures sir.But I found it a little confusing why depreciation is deducted twice in the examples for the calculation of ROI and RI.Could you enlighten me please?
I am also confused , kindly clarify.
It’s not deducted twice – it’s a BS side (top) and IS side (bottom)
I did not understand this part … kindly explain in more detail
thanx for add,,,,,,
what questions are best to practice for ROI and RI from the kit?