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In both finance and accounting, the Return On Equity (ROE) is considered a biased indicator of economic profitability. Opposing this view, this paper shows that an appropriate mean of ROEs signals shareholder value creation. This implies that the notion of Market Value Added may be replaced by...
Persistent link: https://www.econbiz.de/10013115692
This paper proposes a method for evaluating a project under certainty by means of a systemic outlook, which borrows from accounting the way of representing economic facts while replacing accounting values with cash values. The investor's net worth is regarded as a system whose structure changes...
Persistent link: https://www.econbiz.de/10013157663
Two measures of excess profit (residual income) are currently available in the literature: the standard one, of which Economic Value Added (EVA) (Stewart, 1991) is a major instantiation, and Systemic Value Added (SVA) (Magni, 2003, 2004, 2005), also named lost-capital residual income (Magni,...
Persistent link: https://www.econbiz.de/10013157758
This paper deals with the problem of modelling in a formal way the concept of excess profit, also known as residual income. A common idea is that excess profit is an unequivocal concept, being the difference between profit and costs, where all types of costs are taken into account, included the...
Persistent link: https://www.econbiz.de/10013159709
In this paper, we benchmark an investment actively managed (e.g., fund, portfolio) against a reference portfolio passively managed replicating the investment's cash flows in order to measure the value added by the active investment and decompose it according to the influence of the investment...
Persistent link: https://www.econbiz.de/10012866208
This paper presents a methodology which blends sensitivity analysis and fuzzy arithmetic for managing uncertainty in project financing transactions. Specifically, we adopt the perspective of the equityholders and use the average Return On Equity (ROE) to measure shareholder value creation and,...
Persistent link: https://www.econbiz.de/10013403889
Evaluating an industrial opportunity often means to engage in financial modelling which results in estimation of a large amount of economic and accounting data, which are then gathered in an economically rational framework: the pro forma financial statements. While the standard net present value...
Persistent link: https://www.econbiz.de/10013028828