ABSTRACT
Like chapter 5, the following pages are concerned with the relationship between HC and CF-MV measures of profitability. However, in this chapter, which focuses on individual companies, profit and profitability are measured on an equity basis – the more frequently adopted viewpoint in the assessment of individual company performance. To be more specific; the main issue raised here is whether (equity) HC measures are acceptable operational surrogates for (equity) CF-MV measures at the level of the individual firm. Putting the question in more practical terms; are the magnitudes of the deviations between a company’s coterminous HC and CF-MV profit and profitability indices such that practitioners and others, who use an individual company’s track record as a source of information for decision-making purposes, would be willing to use those coterminous HC and CF-MV indices interchangeably?
