History and development of accounting record

Value-based management…

• What is the value of growth Duration ?

Estimated number of years over which the return from investments is expected to exceed the cost of capital.

What do the 7 value drivers determine?

• Cash flow from operations
• Level of debt
• Cost of capital
• Shareholder value
• A detrimental consequence of the emphasis on shareholder value is that it has led to a continued focus on short-term financial performance at the expense of longer-term strategy.

Value-based management… Cont…..

Economic Value Added (EVA)

• is a financial performance measure.
• EVA’s ‘economic profit’ is the amount by which earnings exceed (or fall short of) the minimum rate of return that shareholders and financiers could get by investing in other securities with a comparable risk

What are examples of modified after- tax operating profit?

• Employee training
• Research and development
• Advertising