Market-Expected Return on Investment Bridging Accounting and Valuation

the ability of  accounting numbers to represent economic value is severely limited. Next, he emphasized that competitive  strategy analysis and valuation should be joined at the hip. The litmus test of a successful strategy is that it  creates value, and you can’t properly value a company without a thoughtful assessment of its compet... See more

The implication for investors? Legacy financial metrics should play a lesser role in analyzing businesses.

We have shifted from an industrial economy to an information economy, yet the investments in information assets aren’t recognized in financial statements. They are expensed instead of capitalized. It’s beneficial for investors to change accounting to capitalize intangible assets, but incentives for corporate managers and auditors make it unlikely t... See more