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Article: Shareholder value: Interpretations for a way ahead
- Article from:
- Intheblack
- Article date:
- February 1, 1999
- Author:
CopyrightCopyright Australian Society of CPAs Feb 1999. Provided by ProQuest LLC. (Hide copyright information)
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Too often, capital is ignored in the measurement process. Shareholder value offers a means to gain an accurate picture in a competitive
market.
One of the most dynamic recent developments to measure value creation in a business is shareholder value. Essentially, shareholder value is a residual income concept which is readily calculated by subtracting the cost of capital from net operating profit after tax (NOPAT). Hence, accounting profit is adjusted to include the opportunity cost of capital funds employed by the business, which includes both debt and equity. Shareholder value consequently sets a higher and more rigorous rate-of-return hurdle than conventional accounting profit.
What ...