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Criticism of the Accounting-Based Measures of Performance

In: Financial Performance Measures and Value Creation: the State of the Art

Author

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  • Daniela Venanzi

    (University of Rome III)

Abstract

The traditional accounting-based metrics are not consistent with value creation and do not handle any of the four factors (i.e. investments, cash flows, asset’s economic life and cost of capital) on which value depends. Therefore, managing for short-term earnings compromises shareholder value. In this chapter, the fundamental shortcomings of the accounting-based metrics are discussed, focusing on the following aspects: subjectivity of the accounting figures, inconsistency with the goal of maximizing shareholder wealth, and short-termism of managerial decisions.

Suggested Citation

  • Daniela Venanzi, 2012. "Criticism of the Accounting-Based Measures of Performance," SpringerBriefs in Business, in: Financial Performance Measures and Value Creation: the State of the Art, chapter 0, pages 1-8, Springer.
    • Handle: RePEc:spr:spbrcp:978-88-470-2451-9_1
    DOI: 10.1007/978-88-470-2451-9_1
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    Cited by:

    1. Tanja Planinc & Marko Kukanja, 2016. "Financial performance of the Slovenian restaurant sector," Tourism and Hospitality Industry 25, University of Rijeka, Faculty of Tourism and Hospitality Management.

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