An Investigation & Comparison between Accounting Measures of Performance Evaluation & value-Based Measures in Estimating the Companies’ Economic Rate of Return
Subject Areas : Financial Knowledge of Securities Analysisفریدون رهنمای رودپشتی 1 , محمد حامد خان محمدی 2
1 - نویسنده مسئول
2 - ندارد
Keywords: Performance evaluation, Economic rate of return, Cash Recovery Rate, economic value added, Market Value Added,
Abstract :
Economic performance assessment of companies has been always of interest for stakeholders. In addition to accounting based evaluation model, there is an economic model, which focuses on cash flows rather than profit. One of these models is the “cash recovery rate” based on which the economic rate of return can be estimated. In this article, the relationship between accounting measures of performance evaluation(Return On Assets, Return On Equity, Return on Sales) and value-based measures(Economic Value Added and Market Value Added) in relation to cash recovery rate, which is as proxy of economic performance of companies, has been investigated. As many as 60 sample companies between the periods of 1382 to 1386 have been selected. The achieved results from empirical tests indicate that the return on assets, return on equity, return on sales and market value added are positively and directly related to the cash recovery rate. They can be used as a reliable measure in the performance evaluation in spite of economic value added which lacks information content.