Performance Measures
In this text, I concern myself with performance measurement. In addition to a performance measure of my choice, some of the other performance measures I will discuss include EVA, ROI, and operating leverage. In so doing, I will not only compute the said performance measures but also reflect on their advantages and disadvantages. My companies of choice for this discussion are Apple Inc. And Google Inc.
Performance Measures: Computations
Formula
Apple
Google
Degree of Operating Leverage
% Change in EBIT/
%Change in Sales
Return on Investment
Operating Profit / Total Assets
Economic Value Added
NOPAT -- (WACC * Investment)
Gross Profit Margin
Sales -- COGS / Sales
Degree of Operating Leverage (DOL)
Operating leverage in the words of Stickney and Weil (2007) "refers to the tendency of net income to rise at a faster rate than sales in the presence of fixed costs" (p. 792). In that...
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