User talk:Smarque5

Economic Margin
The Economic Margin framework is a valuation system that explicitly addresses: profitability, competition, growth, and cost of capital. Unlike traditional valuation approaches that utilize highly sensitive perpetuity assumptions, the Economic Margin approach incorporates the principle that competition will decay away excess returns over time over a specified Competitive Advantage Period (CAP).

EM = Operating Cash Flow - Capital Charge (return on and of capital) / Inflation Adjusted Invested Capital

The Economic Margin incorporates differences in:

Capital Structure, Asset Age, Asset Life, Asset Mix, Off Balance Sheet Assets and Liabilities, Additional Investments needed for Earnings and Cost of Capital.

In July of 2000, the chapter, Economic Margin™: The Link Between EVA® and CFROI®, was published in the book:

Value-Based Metrics: Foundations and Practice Edited by: Frank J. Fabozzi and James L. Grant Pages 157 – 178