Question

As a new controller, reply to this comment by a plant manager: "As i see it, our accountants may be needed to keep records for stockholders and Uncle Sam, but I don't want them sticking their noses in my day-to-day operations. I do the best I know how. No bean counter knows enough about my responsibilities to be of any use to me." You are to reply to this statement. "I agree" is not acceptable. Be complete and concise in your reply to this statement.

Answer 1

I don’t agree with the statement.

Stockholders are the investors to the company. They want their investments become fruitful by offering higher return. In this respect they calculate Return on Investment (ROI).

ROI = Net income / Investment.

If ROI becomes low stockholders must protest in shareholders’ meeting, which creates immense pressure to the top level management; it happens because stockholders are the ultimate owner of the company. The plant manager may be liable in this case, since he/she might not try to reduce average total cost – such as reduction of electricity cost, minimizing waste of materials, etc. As we know “if cost decreases net income increases” may not happening here and the plant manager may be held responsible for that. If this thing happens, he/she can’t escape from duty by saying such statement.