This course introduces you to the concept of Economic Profit and its validity as an economic metric to measure business performance. You’ll learn how Economic Profit can be used to make value-creating business decisions and why it is a superior metric to more traditional business performance measures. By the end of the course, you should be able to:
Distinguish the various component parts that make up the Economic Profit metric—including net operating profit after taxes, capital charge, and cost of capital.
Articulate the relationship between a company’s market value and Economic Profit.
Differentiate between Economic Profit, net income, and return on investment as business performance metrics.
Apply various strategies to enhance Economic Profit.
Analyze business performance by disaggregating the Economic Profit metric.
Compare the strengths of Economic Profit and Free Cash Flow metrics to determine when to use each method.