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Finacial Performance

In: Business and Management

Submitted By Ritesh1990
Words 681
Pages 3
Impact of Profitablity on Growth: consumer packaged goods (CPG)

Economic recovery remains vulnerable on all fronts a top-performing company analysis
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Sales and income growth can be expected to influence rate of return and market value measures in both simulated and actual industries. It is unclear if growth in one year will affect profitability and market value measures in a succeeding year in simulated and actual environments. Asset growth, which can be used as a proxy for plant and equipment expenditures, and research intensity, may also affect sales and income growth in a base year or succeeding year, indirectly affecting profitability and market value. These direct and indirect effects may be different in simulated and actual industries, but if students are to learn from simulations there should be a reasonable correspondence between variable effects in simulated environments and real world industries. Recently, value based planning and performance measurement has been receiving more attention in business literature and in actual practice, since it provides a framework for using firm value as a strategic performance measures and focuses on profitability and growth as determinants of firm value (Varaiya, Kerwin, and Weeks, 1987). Many analysts and company executives believe that shareholder value (e.g., stock appreciation + dividends) is a better measure of long term corporate performance than accounting based figures such as ROl, ROE, and EPS which are subject to variation in accounting treatments and which do not take into account the company cost of capital, including debt interest cost and equity cost. Although income measures are widely used as performance measures in simulated environments, many simulations do not provide for computation of stock prices and in those that do, market…...

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