Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 18

; Shareholder Value Analysis and Sustainability; Internet-Based Research Increasing shareholder value is a key objective for many profit-seeking organizations. As indicated in the chapter,
is meant to approximate "economic income" and in this sense can be viewed as a measure of shareholder value added by the firm during a period. Increasingly, managers are realizing that shareholder value is enhanced by creating value for employees, customers, suppliers, the community, and other stakeholders. This problem asks you to consider how
, as a measure of economic value created during a period, can be used to guide and justify sustainability related investments.
Required
1. How is economic value added (
) for any accounting period estimated How does this financial performance metric differ from both conventional accounting income and from residual income (RI)
2. Given the definition of
you provided in (1) above, provide some thoughts as to how
can be used as part of a comprehensive performance-management system to assess and justify corporate investments in sustainability-related projects.
3. Search the Internet to see whether you can identify an example of how an actual company used
to support a sustainability-related investment project or program (i.e., one that dealt with social or environmental performance).
4. Explain how
, as a financial performance metric, can be used as part of a larger strategic management system.