This site will lead you to an effective, custom calculation of Economic Profit (EP) for your company or business unit. The complete program involves the following six steps:
- Establish a working group to support the definition and implementation of EP inside of your firm. (Optional for smaller businesses.)
- Define the business unit(s) for which we are developing the measure. Ensure that each unit is a viable EP center.
- Gather data for the business(es), i.e., enough information to clearly map how business activities can translate into performance results.
- Define Baseline EP from current, summary financial reports as a starting point from which to customize the measure.
- Identify the adjustments to Baseline EP that would improve its ability to track period-to-period changes in business value.
- Finalize your EP measure by selecting adjustments that are material enough to adopt relative to their cost of adoption.
Once this process has been completed, your company will be ready to implement its custom method for calculating EP into management reporting.
