Нов поглед върху доходността на бизнеса
A New Look at Business Profitability

Author(s): Bojidar Nachev
Subject(s): Economy, Business Economy / Management, Financial Markets, Socio-Economic Research
Published by: Университет за национално и световно стопанство (УНСС)
Keywords: business profitability; return on invested capital; economic value added; cash flow return on investment; cash value added
Summary/Abstract: The report provides a brief presentation of the two existing approaches to analyzing and assessing business profitability – the conventional approach and the value-based approach. Regarding the first approach, the main profitability measures (ROA and ROE) are explained and the organization of the analysis in two directions is presented – comparative analysis and factor analysis. Regarding the second approach, the two most popular models are presented and explained: Bennett Stewart’s model for Return on Invested Capital (ROIC) and Economic Value Added (EVA); HOLT Value Associates LP’s model for Cash Flow Return on Investment (CFROI) and Cash Value Added (CVA). The advantages of these models compared to conventional profitability measures and the benefits for financial analysts and other stakeholders are explained. Conclusions are drawn as a result of comparing the capabilities of the two presented analysis approaches.

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