BUSI 4008 Lecture Notes - Lecture 7: Espn Bottomline, Net Present Value, Financial Statement
26 Feb 2018
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Document Summary
Primary objective maximize the value of the firm. Economic income change in the firms value over any given period of time. Maximization of economic income alternative way of phrasing the basic corporate financial objective of value maximization. Economic income is different from accounting income this difference has important management control implications. Congruent the most direct manifestation, or closest proxy, of the theoretical notion of firm value. Accurate no or little systematic biases. Objective not manipulable by the managers whose performances are being evaluated. Understandable in terms of what the measures represent. Cost effective do not require any company measurement expense. Controllability problems only top few managers can actually affect stock price. Not always reflective of realized performance, instead the values merely represent expectations. Potential congruence failure markets are not always well informed about confidential future plans; however if rewards are linked to market valuations, managers may disclose this information even if harmful to the company.
