If a CEO wants to perpetuate value-destroying businesses, the board should actively intercede and insist on a resolution that quickly yields positive economic profits
or else remove that business from the portfolio.
= ($230,000 - $140,000) X 12 = $1,080,000
We are driving economic profit
deeply into specific businesses.
Capitalized economic profit
is the present worth of an entrepreneur's economic (pure) profit expectation from being engaged in the activity of acquiring an asset, or collection of assets, at a known price and then selling, or being able to sell, the same asset or collection of assets at a future uncertain price.
When perfect markets exist for all commodities and inputs, observable profit and economic profit
Appendix III: Economic Profit
and Equity Value: Illustration
The shift from a share of economic profit
to a target incentive as a percent of salary has a profound effect on management incentives.
The case covers a financial services start-up and focuses in the areas of business environment, economic profit
, marginal analysis, consumer behavior, and oligopoly.
Aflac ranks among the best financial services firms because they continue to find ways to meet consumer expectations while generating superior economic profit
The overwhelming majority of scientists I have known in my professional career pursue their work mainly because of their intrinsic curiosity, not because of economic profit
Those parameters can be integrated into at least three well-known valuation models--the discounted cash flow (DCF) model, the economic profit
model, and the adjusted present value (APV) model.
The taxpayer's objective must be to achieve an economic profit
independent of tax considerations" (George Gianaris, TC Memo 1992-642).