CHAPTER THIRTEEN
Measuring Business Performance
ONE OF THE BASIC causes of poor performance on the part of analysts, investors, and business managers is the yardstick they use to determine how a business is doing—“earnings per share.”
Performance in a business means applying capital productively and there is only one appropriate yardstick of business performance. This is the return on all assets employed or on all capital invested (the two differ, but not significantly). Whether the assets come from the outside or inside makes no difference. Retained earnings are just as much money as a bank loan or new equity. A business that does not earn the ...
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