Profitability depends on how efficiently scarce resources are utilised. The relevant easure of efficiency depends on the economic objective. In a private company, the objective is to maximise its contribution to the income and wealth of the owners in the short or long term. The eco- nomic profit in each period is given by the maximum distribution to the owners, without reducing the firm’s market value. The value concept is forward-looking, in the sense that the market value of the company is the present value of the future cash flow that it is expected to generate for the owners. A positive present value means that the enterprise is yield- ing an average rate of the return on invested capital that is at least as large as the owners could have achieved by reinvesting the financial cap- ital in the external financial market, assuming this to be the alternative investment opportunity. Hence, profitability is defined in relation to the external rate of return opportunity for the capital required to operate the company.
Weitere Kapitel dieses Buchs durch Wischen aufrufen
Bitte loggen Sie sich ein, um Zugang zu diesem Inhalt zu erhalten
Sie möchten Zugang zu diesem Inhalt erhalten? Dann informieren Sie sich jetzt über unsere Produkte:
- Project Profitability from Society’s Point of View
Kåre P. Hagen
- Palgrave Macmillan UK
Neuer Inhalt/© Stellmach, Neuer Inhalt/© Maturus, Pluta Logo/© Pluta, Rombach Rechtsanwälte/© Rombach Rechtsanwälte