Don’t Cut Costs, Create Value!
Summary: Even though times are tough, and will get tougher, maximizing value is still the goal. Across the board cost cutting or capital rationing mandates to preserve book profit and generate cash are the refuge of the weak. Smart managers will seize the moment and continue to position their firm for long run value. Making decisions to maximize the present value of real economic profit, or EVA as I call it, is still the right answer, and now more than ever.
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The largest of China's state-owned enterprises adopt EVA as the best measure to assess their performance.