Explain the three shareholder metrics used in market-based management
What will be an ideal response?
Shareholder value metrics are especially important because they measure earnings per share, economic profit, and the price-earnings ratio. All of these metrics start with market demand and the efficiency of a business's effort to capture market share.
(1 ) Earnings per Share - Net profit divided by the number of shares equals earnings per share.
(2 ) Economic Profit - Economic Profit tells us the amount that is left over after the cost of capital is taken into account. This dollar metric is equal to net profit minus invested capital times the cost of capital.
(3 ) Price-Earnings (PE) Ratio: A company's PE ratio is the ratio of the company's stock price to its earnings per share. The higher the PE ratio, the greater the risk to investment.
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A) Financial institutions B) Credit-rating agencies C) Securities companies D) none of the above
The expensing of a long-lived asset such as a wastebasket is justified by which of the following accounting rules or principles?
A) Matching B) Materiality C) Full disclosure D) Consistency