Rationalisation

Reviewed by Vineeth | Updated on Oct 05, 2020

Introduction

The reorganisation of a firm with the view of enhancing the efficiency of the operation is referred to as the rationalisation. This process of reorganisation may sometimes lead to changes being made to the policy, reduction or enhancement of workforce, and changes in approach and strategies pertaining to a product or service being offered by the company.

Rationalisation, as reorganisation, is done in a broad manner by making strategic changes along with structural modifications. At times, the situation demands a company to resort to rationalisation in order to make the required changes which will then lead to enhanced revenues and reduction in the operating cost and thereby improving its bottom line.

The process of rationalisation necessarily refers to the mechanism which makes the company become mindful of the expenses. For instance, the implementation of some financial models and technologies will eventually lead to the company reducing its expenses and thereby making it rational and more efficient.

Implementation

Making use of the rationalisation and its applications, particularly at times when there are mergers and acquisitions can help the company optimise its expenses by minimising the operational expenses and supporting the primary objective behind the new deal. It involves providing support to legal and regulatory concerns, business continuity, and integration.

Mergers and Acquisitions

Majority of the business entities will amass a significant amount of information technology and its applications over time, specifically at times when the organisations will grow and fail to fully combine assets and operations with every transaction that is going to take place. Most of the applications available in the market will not facilitate the firm’s objective after every merger (or acquisition) and will need to revisit them in order to support the new venture.

Related Terms

  • Inflation Accounting

    Inflation accounting is a unique method used to weigh on the published statistics of multinational firms in the effects of soaring or plummeting prices of products in some areas of the world.   Read more


  • Statutory Audit

    A statutory audit is a legally required check of the accuracy of the financial statements and records of a company or government.   Read more


  • Statistics

    Statistics is a class of mathematical study which will use representations, quantified models, and synopses for a given set of real-life studies and experimental data.   Read more


  • Operating Revenue

    Operating revenue refers to the revenue generated by a company from its primary activities.   Read more


  • Escalator Clause

    An escalator clause is also known as an escalation clause, where the provision allows for an automatic increase in the wages or prices.   Read more


  • Agency Problem

    The agency problem is a scenario of a conflict of interest which is inherent in all relations wherein one party is anticipated to operate in the best interests of another party.   Read more


Recent Terms

  • Amortisation

    Amortisation is an accounting strategy used to regularly reduce a loan's book value or an intangible asset's book value over a given period of time.   Read more


  • Profit Centre

    A profit centre refers to a branch, unit, or division of a company which directly adds or which normally adds to the bottom-line or profits of the company as a whole.   Read more


  • Authorised Share Capital

    Authorised share capital is the number of stock units (shares) that a company may issue, as set out in its association memorandum or incorporation papers.   Read more