Enager Industries As Companies Gobble Each Other Essay

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Enager Industries

As companies gobble each other up in our increasingly interconnected economic world, Enager Industries demonstrates some of the accounting and management complexities of companies that have moved far beyond their original brief. The company as it is currently arranged is divided into three essentially autonomous divisions. This paper examines some of the complexities involved in analyzing such a company from both an internal as well as an external perspective.

The three different divisions of the company are so different that they might be seen as essentially different entities, connected only by a business philosophy. The fact that the divisions are so different in their focus and thus the rules governing standard operating procedures should mean that there are different criteria for success for each of the divisions. However, the management have in general proven to be less than sufficiently flexible in determining different criteria for the different divisions. The top managers of the company assess the divisional performances, at least in terms of return on assets, or ROA.

However, while such a comparative approach by management to the different divisions might have an initial, superficial appeal, any closer analysis demonstrates the foolhardiness of this approach.

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Treating each of the divisions the same is very much comparing apples to oranges, or expecting all of a family's children to be interchangeable in terms of skills, talent, and industriousness.

Before proceeding, it is important to specify what exactly is meant by return on assets. ROA is simply a manner of determining the amount of earning that resulted from a certain amount of invested capital. The ROA can -- and indeed should -- vary widely depending on the type of industry in question, as well as on other factors such as the general economic climate at any given time.

The following summarizes why it is highly unrealistic and highly inadvisable to use ROA to make any comparisons across different types of industries. This remains true regardless of whether those different types of industry happen to….....

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