The term book value has several uses. It can refer to a single asset or the company as a whole. When referring to an individual asset, such as a piece of equipment, book value refers to the asset's adjusted for any accumulated depreciation or amortization expense. The value, or cost and its accumulated depreciation expense, is called its book value. market value or replacement cost In contrast, when the term refers to the entire company, historical value or original purchase price as reported in the firm's ASHER: That makes sense. So, what makes this value important to investors is that it is value that can change-but only due to a couple of events, including the of Treasury stock, the sale of new common or preferred shares, and the payment of Equally important, it change in response to changes in the market prices of the firm's shares. TESSA: Right! So, how useful would a firm's book value te for assessing the performance of Galaxy's management? ASHER: Well, because Galaxy's book value with changes in the market price of the firm's shares, the firm's book value reflect management's efforts to maximize the price of the firm's common stock and therefore be used to evaluate management's performance Now, what about "Economic Value Added TESSA During the 1990s, the consulting firm Stem, Stewart & Company developed the concept of Economic Value Added, or EVA, to better we management's performance in maximizing their shareholders' wealth Galaxy S IVA equals the additional pront created in excess of the after tax operating income necessary to finance its total aftur tax cost of capital, which is expressed in annual colors. It is computed by subtracting Galaxy's from its In turn, Gly's annual cost of capital is calculated by multiplying its total operating capital, which includes its 3 09 000 . The term book value has several uses. It can refer to a single asset or the company whole when referring to an individual asset, such as a piece of equipment, book value refers to the asset's adjusted for any accumulated depreciation or amortization expense. The value or difference between the machine's historical cost and its accumulated depreciation expense, is called its book value in contrast, when the term refers to the er y means the total as reported in ASHER: That makes se So, what makes this important to investors value that can change-but only due to a couple of events, including the Treasury shown or preferred shares, and the payment of change in response to unges the market prices of the firm's shares 27- sited TISSA: Res, howetu would fem's book value be for sessing the performance 'mement? ASHER. Well, because w's book value henges in the price of the share the firm's book valve rect management's efforts to more of the most and therefore be used to www.comic TISSA Dung the consum, non developed the core of coome Value Added, or EVA to better Grohe per income anyte finance its totale cost of computed by Gays 1 % 5 A 0 6 & 7 W 8 9 -O E R 11 T Y U delete o a { D F G H J KIL . C V B B Z M . ? # command option The term book value has several es tan refer to a single asset or the company as a whole. When referring to an individual asset, such as a piece of woment, book value refers to the set's adjusted for any accumulated depreciation or amortization expense. The value, or difference between the machine's historical condits accumulated deprecation expense, is called its book value In contrast, when the term refers to the entire company. It means the total value of the company's the firm's as reported in toalets ASHER: Thomas So, what makes this value important to investors is that it is shareholders uity can change-but y en a couple of events, including the of Treasury stock, the sale of now chorreres, and the payment of Equally important change in response to changes in the market prices of the firm's shares TESSA So, how well would's book valut beforeing the performance of Gary's management? ASHER, G's took vir with anges in the market price of the firm's shares, the firm's book value we management's efforts to maximize the price of the firm's common stock and therefore be used to ment's performance Nonton Value Adde TENSADOng the 1980s, the commentata company developed the concept of Economic Value Added, EVA, to better eurosthesis of tax operating concessary to finance ratex.cost of roos $ : % 5 A 6 & 7 E 8 R G 9 T 1 0 Y U I + F O delete P H { [ V L B N enter M return ? / H Hancial Statements, Cash Flow, and Taxes The term book value has several uses. It can refer to a single asset or the company as a we. When referring to an individual asset, such as a piece of equipment, book value refers to the asset's adjusted for any accumulated depreciation or amortization expense. The value, or difference between the machine's historical cost and its accumulated depreciation expense, is called its book value. In contrast, when the term refers to the entire company, it means the total value of the company's the firm's as reported in ASHER: That income statement only due balance sheet payment at makes this value important to investors is that it is value that can change-but including the of Treasury stock, the sale of new common or preferred shares, and the qually important, change in response to changes in the market prices of the firm's shares. TESSARight So, how useful would a firm's hook value be for assessing the performance of Galaxy's management? ASHERI Well, because Galaxy's book value with changes in the market price of the firm's shares, the firm's book value relect management's efforts to maximize the price of the firm's common stock and therefore be used to evate managements performance, Now, what bout "Economic Value Added TESSA: During the 1990s, the consulting firm Stern, Stewart a company developed the concept of Economic Value Added, or EVA, to better es management's performance in matering the shareholders' wealth Ga's EVA equals the additional profit created in wess of the after tax operating income necessary to finance its total after-tax cost of which is expressed in annual dollars. It is computed by atracting Galaxy's from os In turn, Gey's cost of capitaleated by mumplings to operating capital, which includes its 80 888 23 > 3 $ 4 FB % 5 A & 7 ** C E 8 R 9 40 T T E 0 Y * U I delete D O F P { G H C L V change in response an expected future ket prices of the firm's shares The term book value has several uses. It can refer to a single asset or the company as a whole. When referring to an individual asset, such as a piece of equipment, book value refers to the asset's adjusted for any accumulated depreciation or amortization expense. The value, or difference between the machine's historical cost and its accumulated depreciation expense, is called its book value x In contrast, when the term refers to the entire company, it means the total value of the company's the firm's A-Z as reported in ASHER: That makes sense. So, what makes this value important to investors is that it is value that can change-but only due to a couple of events, including the of Treasury stock, the pr preferred shares, and the payment of Equally important, it TESSA: Right so, how well would a firm's book value be for stressing the performance or a historical mgehent? ASHER: Well, because Galaxy's book value with changes in the market price of the firm's shares, the firm's book value rect management's efforts to maximize the price of the firm's common stock and therefore be used to we management's Derformance Now, what about "Economie Value Added TESSAI Og the 1990s, the consulting firm Stern, Stewart & Company developed the concept of Econome Value Added, or EVA, to better vis management's performance in maximizing their shareholders' wealth Galey's EVA equals the oral profit created in excess of the after-tax operating income necessary to finance its total after tax cost of troms ape, which is expressed in anus tollers. It is computed by subtracting Galaxy In turn, exact of capital is calculated by multiplying its total operating capital, which includes its 20 888 FS FF % 5 A FB 6 & 7 090 W E 8 R 9 ) 0 T Y F 0 delete P G J X The term book value has several uses. It can refer to a single asset or the company as When referring to an individual asset, such as a piece of equipment, book value refers to the asset's adjusted for any accumulated depreciation or amortization expense. The value, or difference between the machines historical cost and its accumulated depreciation expense, is called its book value In contrast, when the term refers to the entire company, it means the total value of the company's A-Z as reported in ASHER: That makes sense. So, what makes this value important to investors is that it is value that can change-but only due to a couple of events, including the of Treasury sock, the pr preferred shares, and the payment of Equally important, change in response an expected future et prices of the firm's shares. a historical TESSA: So, how useful would a firm's book value be for assessing the performando mgehent? ASHER. Well, because Gal's book value with changes in the market price of the firm's shares the firm's book value efect management's efforts to maximize the price of the firm's common stock and therefore be used to te manages performance Now, what about EVA TESSA: Dunges, the countrm Stern, Stewart Company developed the concept of Economic Value Added, or EVA, to better es maneres performance in the shareholders' wealth Gy's the onion profit created ises of the after-tax rating income necessary to finance its totaler-tax cost of where in dollars. It is computed by subtracting as from Intaly's cost of capitalisted by mutiplying its total operating care includes 80 . 3 A F 4 5 & &7 6 C 8 9 E R 0 T Y delete U O P { F G 1 H J K L enter V B return N ? / Search this cour 03: Assignment - Financial Statements, Cash Flow, and Taxes The term book value has several uses. It can refer to a single asset or the company as a whole. When referring to an individual asset, such as a piece of equipment, book value refers to the asset's adjusted for any accumulated depreciation or amortization expense. The value, or difference between the machine's historical cost and its accumulated depreciation expense, is called its book value. In contrast, when the term refers to the entire company, it means the total value of the company's the firm's as reported in ASHER: That makes sense. So, what makes this value important to investors is that it is value that can change--but only due to a couple of events, including the of Treasury stock, the sale of new common or preferred shares, and the payment of Equally important, it change in response to changes in the market prices of the firm's shares. TESSA: Right dividends w would a firm's book value be for assessing the performance of Galaxy's management? Interest ASHERI We, bey's book value with changes in the market price of the firm's shares, the firm's book value reflect management's efforts to maximire the price of the firm's common stock and therefore be used to evaluate management's performance Now, what about Economic Value Added TESSA During the 1990s, the consulting firm Stem, Stewart & Company developed the concept of Economic Value Added, or EVA, to better management's performance in maximizing their shareholders' wealth Galaxy's EVA or the additional profit created in excess of the after tax operating income necessary to finance its total after tax cost of Capital which is ressed in annual com It is computed by subtracting Galaxy from its In turn, Gesannual cost of capitais calculated by multiplying to operating capital, which includes its 30 GOO GOD R 15 # 2 F Q Search th - Financial Statements, Cash Flow, and Taxes The term book value has several uses. It can refer to a single asset or the company as a whole. When referring to an individual asset, such as a piece of equipment, book value refers to the asset's adjusted for any accumulated deprecation or amortization expense. The value, or difference between the machine's historical cost and its accumulated depreciation expense, is called its book value. In contrast, when the term refers to the entire company, it means the total value of the company's as reported in the firm's ASHER: That makes sense. So, what makes this value important to investors is that it is value that can change-but only due to a couple of events, including the of Treasury stock, the sale of new common or preferred shares, and the payment of Equally important, it change in response to changes in the market prices of the firm's shares. TESSAI Right So, how useful would a firm's book valu sessing the performance of Galaxy's management? will not ASHER: Well, because Galaxy's book value with changes in the market price of the firm's shares, the firm's book value reflect management's efforts to maximize the price of the firm's common stock and therefore be used to evaluate management's performance Now, what about "Economic Value Added TEST: During the 1990s, the consuming firm Bern, Stewart Company developed the concept of Economic Value Added, or EVA, to better www management's performance in manother shareholders' wealth GIVA equals the additional profit created in excess of the after tax operating income necessary to finance its total after tax cost of capital, which is expressed in annual dollars. It is computed by subtracting Galaxy's In turn, y's cost of capital cated by tingits total from its operating capital, which includes its 90 900 000 54 FS # $ F2 2. 200 Q Search this course Assignment - Financial Statements, Cash Flow, and Taxes the firm's X ASHER: That makes sense. So, what makes this value important to investors is that it is value that can change-but only due to a couple of events, including the of Treasury stock, the sale of new common or preferred shares, and the payment of Equally important, it change in response to changes in the market prices of the firm's shares. TESSA: Right So, how useful would a firm's book value be for assessing the performance of Galaxy's management? ASHER: Well, because Galaxy's book value with changes in the market price of the firm's shares, the firm's book value reflect management's effo price of the firm's common stock and therefore be used to evaluate management's performance. does not change Now, what about "Economic Value Adde changes TESSA During the 1990s, the consulting firm Stern, Stewart & Company developed the concept of Economic Value Added, or EVA, to better wess management's performance in maximizing their shareholders' wealth Calaxy's EVA equals the additional profit created in excess of the after tax operating Income necessary to finance its total after-tax cost of capital, which is expressed in annual dolars. It is computed by subtracting Galaxy's from its orang In turn, Galaxy's annual cost of capital is calculated by multiplying its total operating capital, which includes its netedassets and net operating working capital, by the after tax percentage cost of capital OK, oven that description, here's a question for your compared to the book value, what is the advantage of using the EVA to evaluate the performance of Galaxy management? ASHER: Gesond to think OK. It's better to evaluate the performance of Galaxy' management by using the company's EVA rather 80 . PS FP $ 4 % 5 A VO 6 & 7 * O 9 0 E R T T Y delete U Assignment - Financial Statements, Cash Flow, and Taxes Search this course the firm's ASHER: That makes sense. So, what makes this value important to investors is that it is value that can change-but only due to a couple of events, including the of Treasury stock, the sale of new common or preferred shares, and the payment of Equally important, it change in response to changes in the market prices of the firm's shares A-Z TESSA: Right! So, how useful would a firm's book value be for assessing the performance of Galaxy's management? sited ASHER Well, because Galaxy's book value with changes in the market price of the firm's shares, the firm's book value reflect management's efforts to maximize the price of the firm's common stock and therefore be used to management's performance can about "Economic Value Added can TESSA: During the 1990s, the consulting firm Stem, Stewart Company developed the concept of Economie Value Added, or EVA, to better assess management's performance in mating their shareholders' wealth Calaxy's EVA equals the additional profit created in excess of the after tax operating income necessary to finance its total after-tax cost of capital, which is expressed in annual dollars. It is computed by cuttracting Galaxy's from its In turn, Galaw's annual cost of capital is calculated by muling its tot operating capital, which includes its net de andre sperating working carta, by the tax percentage cost of capital OK. ve that description, heres question for your compared to the book value, what is the advantage of wine trvat elute the performance Galaxy management? ASHER mesecond to think OK, better to the performance of Gey's management by wing the counter * 80 888 FY 411) U 1 # 3 $ 4 % 5 6 & 7 + 8 9 0 delete W E R T Y U 0 P { Ch 03: Assignment - Financial Statements, Cash Flow, and Taxes Q Search this course 2 ASHER: That make sense. So, what makes this value important to investors is that it is value that can change-but only due to a couple of events, including the of Treasury stock, the sale of new common or preferred shares, and the payment of qually important, change in response to changes in the market prices of the firm's shares A-2 TESSA: Right So, how usefu would a firm's book value be for assessing the performance of Galaxy's management? ASHER: We, because Galaxy's book value with changes in the market price of the firm's shares, the firm's book value refect management's efforts to maximize the price of the firm's.common stock and therefore be used to evaluate management's performance should not Now, what about "Economice should TESSA: During the 1970s, the commuting orm Stern, swart Company developed the concept of Economie Value Added or EVA, to better management's performance in maming the shareholders' wealth Gla's EVA then profit created in excess of the after-tax operating income necessary to finance its totalter-tax cost of caso in annual computed by subtracting Galaxy's from In turn, we con piscindly multiplying its total operating cat, which includes its rate us and not permin working cl, Dy te atentax percentage cost of art. OK, that description, question for your compared to the book, what we svantage of using the IVA to evaluate the formace of law's management ASHER dute Ok, enter to see the performance of Galaxy's management by the company's EVA rather 80 188 Ad . # 3 13 U 4 % 5 6 & 7 8 9 1 0 E R T Y delete I 0 F H J L 42 TESSA: During the 1990s, the consulting thrm Stern, Stewart & Company developed the concept of Economic Value Added, or EVA, to better assess management's performance in maximizing their shareholders' wealth Galaxy's EVA equals the additional profit created in excess of the after-tax operating income necessary to finance its total after-tax cost of capital, which is expressed in annual dollars. It is computed by subtracting Galaxy's from its net operating profit after taxes pitalis calculated by multiplying its total operating capital, which includes its working capital, by the after-tax percentage cost of capital net income croonera question for you: Compared to the book value, what is the advantage of using the EVA to evaluate the performance of Galaxy's management? ASHER: Give me a second to think OK, it's better to evaluate the performance of Galaxy's management by using the company's EVA rather than the book value of its shareholders' equity because the better the managerial decisions being made, the the after-tax net operating income earned, the the difference between this net operating income and the cost of capital needed to generate that Income, and the the EVA, or true economic profit, earned by the company TESSA Nicely donel Don this make your reading of tax's annual report ser? 80 73 000 000 15 ... 2 0 0 Now, what about "Economic Value Added TESSA: During the 1990s, the consulting firm Stern, Stewart & Company developed the concept of Economic Value Added, or EVA, to better assess management's performance in maximizing their shareholders' wealth Galaxy's EVA equals the additional profit created in excess of the after tax operating income necessary to finance its total after-tax cost of capital, which is expressed in annual dollars. It is computed by subtracting Galaxy's from its annual dollar cost of capital In turn, Galaxy's annual cost of capital is calculated by multiplying its total capital, which includes its annual doilar cost of debt net Fixed assets and net operating working capital, by the after-tax percentage cost Ox, given that description, here's a question for your compared to the book value, what is the advantage of using the EVA to evaluate the performance of Galaxy's management? nor ASHER: Give me a second to think... OK, it's better to evaluate the performance of Galaxy's management by using the company's EVA rather than the book value of its shareholders' equity because the better the managerial decisions being made, the the after-tax net perating income earned, the the difference between this net operating income and the cost of capital needed to generate that come, and the the EVA, or true economie profit, earned by the company TESSA NIC nel Does to make your reading of Galaxy's annual report easier 64 F3 PH FO $ 4 % 5 * 6 7 8 9 R 0 T + 1 T Y U delete