ABSTRACT
A sound approach to financial measurement is to make sure that an organization's data base includes three types of information: historical data, current data; and future data. This chapter presents three different approaches to measuring financial performance: Economic Value-Added (EVA), Market Value-Added (MVA), and Activity-Based Costing (ABC). EVA is an accurate way of measuring a company’s profitability and is more accurate than traditional profit measures. MVA is thought to be the best indicator of a company’s ability to create wealth for its shareholders. In addition to the cost of actually producing a product, the ABC approach involves measuring the cost of machine downtime, the cost of inventory waiting to be shipped, and the cost of reworking or scrapping bad product. The cost of quality is a statistic used today by many organizations to track the amount of labor and materials that is expended on rework or the correction of problems.
