BUS 424 Chapter Notes - Chapter 10: Economic Value Added, Cash Flow, Financial Statement
Reflect the aggregate or bottom-line impacts of multiple performance areas: accounting profits reflect the aggregate effects of both revenue- and cost-related decisions. Reflect changes in stock prices or shareholder returns: accounting measures. The most direct manifestation or closest proxy of the theoretical notion of firm value. Allays political pressure that otherwise might be brought on the company by outsiders: cost effective do not require any company measurement expense, understandable in terms of what the measures represent. Limitations cause organizations to look for surrogate measures of performance: controllability. Can generally be affected to a significant extent only by the top few managers in the organizations, those who have the power to make decisions of major importance: not reflective of realized performance. Heavily influenced by future expectations, but they might not be realized: congruence. For competitive reasons, markets are not always fully informed about a company"s plans and prospects, future cash flows, and risks.