Page info: *Author: Mathiesen, H. *Document version: 2.5. *Copyright 1997-2017, ViamInvest. Legal notice.



 

Exhibition: Corporate returns (or performance) and corporate resources

 

Introduction: In the figure below each of the corporate returns (green highlight) can be associated with a corporate resource (yellow highlight). One may ask why the standard corporate balance sheet does not include other resources than debt and equity. One answer may be that the firm does not control those resources as much as they control debt and equity and therefore they are less relevant to include in the balance sheet. However, just because we usually only measure a return on equity and / or a return on 'total' assets it does not imply that these are the only return measures. E.g. if it was worth the money we could also measure the combined return from equity, debt and human capital. The figure's perspective of corporate performance is deeply rooted in the classis theory of finance, because each stakeholder’s economic value of dealing with the firm could be calculated as the present value of the stakeholders' future cash flows (actual returns) that accrue from the relation with the firm. This exhibition is made by ideas from a figure in Copeland, Koller, and Murrin [1995, page 24].

 

Other kinds of corporate resources are: 3) Human capital. 4) Public infrastructure of importance for the firm. 5) Resources that suppliers dedicate to generate the suppliers return. 6) Resources that consumers dedicate to searching and evaluating the firm's products.

 

- Copyright 1997-2017, ViamInvest. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Legal notice.