District Managers’ Incentive Bonus

District Managers’ incentive bonus was derived from sustaining and exceeding the 90% of the company’s Return on Assets (ROA) targets wherein a 38% ROA is reachable as per Mr. Richard. ROA is a useful and easy measure of district performance and profitability in which anything that affects the financial statements are reflected particularly the assets and income of the company. It gives us an idea on how the district are profitable and efficient they are in relation to its employed total assets which the Management have a certain control wherein they can invest or divest capital investment in order to achieve the target ROA of the company or district. Having this high level control on the achievement of ROA can be a disadvanatage to the company as a whole in a such a way that Managers be likely to reject capital investment proposal that has a positive net present value but lower the ROA ratio and vice versa. Also, Managers are less likey to invest in long term projects and new assets are not fairly evaluated. Nonetheless, Quality should have a good strategic plan in capital investment and employ the use of non-financial performance measures along with ROA in evaluation of Managers and its units. The company should also ROA in the evaluation of the companies performance and not in the investment decisions or better yet use the Economic Value Added (EVA) At present, districts’ evaluation of performance are based on the income before taxes per unit. Evaluation of districts should be based from inclusion of income taxes since Managers should be held for profits as well for its applicable taxes. Inclusion of income taxes would change the magnitudes in the calculations but would not change the conclusions to be derived.