SOLUTION A
V.S. KRISHNAN
President, RPG Enterprises

Getting a grip on Alpha Steel's debt, and reducing the interest-liability is only a small part of the much larger question that ceo Vinayak Chowdhury and his team should, in fact, be addressing. Which is: how do each of the business divisions compare with their competition? The first step in understanding the potential of a business in terms of its present and future growth is to get the elements of its final cost of operations right so that the value it adds is clearly understood. This is a critical--and vulnerable--area of action.

Critical because unless you have a clear picture of how much your company's products cost, your decisions are bound to be affected. Vulnerable because you can make mistakes without even being aware of them, such as in allocating interest on the basis of turnover instead of the capital employed. Once you have the cost-data in place through management accounting, several related questions will surface: which are the products and businesses that are profitable? What is their competitive edge? Why, and where, are the others losing out? What is the extent of cross-financing among businesses? Is the tra