The Quest for Value Revisited

35 Pages Posted: 23 Feb 2004 Last revised: 10 Jun 2016

Date Written: October 31, 2014


Period profit is a result. It starts with an investment generating cash. After deduction of value differences and taxes, net profit remains. Share capital (embedded value - what really is present), shareholder value (economic value - what might happen, additional to the existing activities or 'the market value of the company's shares') and cash flows, are all inter-related.

Analogous to the law of conservation of energy in physics, the law of preservation of value holds true in economics, a natural law. Within thorough calculations, everything fits together seamlessly. Although being different notions (e.g. shareholder value and period profit), each having its own peculiarities, in between the various quantities, no euro, no dime, no cent can disappear or appear just like that. In other words, all amounts of money (inherent in an exemplary problem) are inter-dependent.

Measuring and reporting a variety of non-financial indicators i.e. widening the information spectrum is a welcome development, generally speaking, but information about the game cannot step into the result. Management is in continuous need of up to date financial accounts, that are clear and complete, speak for themselves, contain proven numbers, and unravel the future. Ex ante accounts are signposts on the road to the future. Walking down the road, ex post accounts are made regarding past time periods and new data will generate new signposts on the road ahead. Nothing is able to replace thorough financial statements, not even the most extensive balanced scorecard/performance-review.

This paper presents uniform metrics that are capable of handling both risk (by using for instance an alternative rate) and time value of money to the fullest extent. No more is necessary than a simple and easy procedure, which provides a check at any point in time against stipulated project value. Performance measurement, monitoring and control, from project inception to completion. Assessing NVA (Net Value Added) is transparent, it eases the tension among multiple interest groups and it makes the decision-making less complex, costly and subjective. This is compared to the disparity of metrics (between project appraisal and subsequent evaluation) so far applied to measure and control project performances.

Keywords: Strategic Investments Decision-making, Integration of Project Appraisal and Subsequent Evaluation, Uniform Metrics from Project Inception to Completion, Neither EVA® nor CVA® but NVA i.e. Net Value Added

Suggested Citation

Jacobs, Jan F., The Quest for Value Revisited (October 31, 2014). Available at SSRN: or

Jan F. Jacobs (Contact Author)

Independent ( email )


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