In the earlier blog - we mentioned about economic profits and mentioned that this approach to measure performance is severely limited. In this blog we mention the various approaches one could take to measure a firm's performance.
We could look at performance from various measures:
- Survival as a measure of performance
- Stakeholder approach to performance measurement
- Simple accounting measures of performance
- Adjusted accounting measures of performance
- Event study measures of performance
- Sharpe's measure
- Treynor Index
While each of these solves some of the limitations, they would themselves have some other limitations. We would discuss each of these at appropriate times, however to just begin this discussion we would take the first 2 measures and discuss them. Once we have made some advance in accounting segment in our blog, we would return here to explain the other aspects.
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