TRANSFER PRICES: REFLEXES OF THEIR USE IN EVALUATING MANAGERS’ PERFORMANCE AND AREAS OF RESPONSIBILITY

Abstract

The article presents, departing from bibliographical research, a proposal of a model of measuring profitability of the business areas and evaluation of the managers' performance when decentralized management is adopted. Drawing on the proposed model, the main options of profitability measurement have been critically analyzed, under the assumption that the transfer price based on the market portrays best the areas performance, allowing a comparison between the company and its competitors. The article also presents an analysis of the return on investment with the application of each one of the models, demonstrating how it is possible to calculate the return on the invested capital of each division. It has been concluded that it is possible to project models of transfer prices, capable of supporting the management process, through a set of logical premises and requirements, structured by appropriate concepts, as well as to use the transfer price based on the market to evaluate the positioning of the company in relation to its competitors. Keywords: Transfer price. Performance Evaluation. Areas of Responsibility.