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in this video I want to introduce you to the concept of transfer pricing so a transfer price is the price thats charged by the selling division to the buying division for an intermediate product within the same firm okay so lets say were talking about a company called ABC automotive company and they have multiple divisions and lets say that one of their divisions produces batteries okay so they could sell those batteries within the same firm they could transfer them to the automotive assembly division okay so lets say theres this division that theyve actually build cars okay so thats their output is cars and then this this divisions output is batteries and so the battery division could actually sell those batteries to an outside entity there could be some outside firm that purchases the batteries from the battery division or the battery division could sell the batteries to the automotive division within the same company okay so this is all one company here and then the battery