Transfer Pricing

In brief:

The business process consists of stages or phases that follow on from each other in a logical order or specific time sequence. Investments in production in later stages are based upon input from parts of the firm further upstream. The individual stages are linked together by these inputs. But how can firms align the different stages? How can they plan requirements and ensure efficiency from one stage to the next? And what incentives are there for the different stages to work together in an optimum fashion? The answer to these questions is to be found in transfer prices.