I’m working on a accounting discussion question and need an explanation and answer to help me learn.
Sherry Smith is the president/CEO of Tiller Components. She founded the firm and has led it to become an industry leader in the area of automobile manufacturing components and parts. The company has plants in over 35 areas across the country. Smith is finding that she cannot manage and stay on track with things the way she was able to in the past. Explore the advantages and disadvantages of decentralizing the company’s decision-making activities among the different local and regional managers. Evaluate what functions Smith should consider to be conducted centrally and why she should choose these functions. How would the shift in this method of decision-making and management impact the company overall?
Further, how can the use of analytical tools, such as return on investment (ROI) and residual income assist Smith with better understanding how each of her divisions and segments are performing? Are these tools sufficient to understand the firm’s overall success? Are there other metrics, such as liquidity or profitability ratios that can be used to better assess each division? Explain.