Evaluate performance Strategic system- Management Accounting
Read “Using Shareholder Value to Evaluate Strategic Choices” by Nick Fera, Management Accounting (November 1997).
The basic principle of the article is that performance evaluation based on accounting measures alone is not sufficient. The evaluation of a business unit or of the unit’s manager must also consider the business unit’s performance in creating shareholder value. Based on ideas from Alfred Rappaport’s book, Creating Shareholder Value, the article develops the measures of cash flow and market risk. An illustration for a hypothetical firm is provided.
After reading the article, thoughtfully respond. In your response, consider why it is important for firms and managers to consider shareholder value, and the key factors in determining shareholder value.
