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In Driving Shareholder Value with Your Supply Chain, Figure 1 (see Module 5 / Additional Reading) depicts the main factors impacting economic profit (sales revenue,
In "Driving Shareholder Value with Your Supply Chain," Figure 1 (see Module 5 / Additional Reading) depicts the main factors impacting economic profit (sales revenue, cost of sales, working capital, and physical capital). More formally, we can say: - Economic Profit = Net Operating Profit After Taxes (NOPAT) - Invested Capital * Weighted Average Cost of Capital (WACC) where, Invested Capital = Net working capital needed for operations + Fixed assets net of accumulated depreciation + Other assets needed for operations - Think about this definition of economic profit in answering the following questions. 1. (B1) Explain the difference between accounting profit and economic profit. 2. (B2) Explain how using economic profit as a managerial metric might encourage closer integration (i) between various functions within an organization and (ii) between partner organizations in the supply chain. 3. (B3) Describe three additional financial metrics and give concrete examples of how using these metrics could improve (or not) decision making in the supply chain
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