BUS 498 Chapter 5

Market Capitalization

A firm performance metric that captures the total dollar market value of all of a company's outstanding shares at any given point in time (Market cap = number of outstanding shares x share price).

Economic Value Created

Difference between value (v) and cost (c), or (v-c); sometimes also called economic contribution.

Shareholders

Individuals or organizations that own one or more shares of stock in a public company. They are the legal owners of public companies.

Total Return to Shareholders

Return on risk capital that includes stock price appreciation plus dividends received over a specific period.

Value

The dollar amount (v) a consumer would attach to a good or service; the consumer's willingness to pay; sometimes also called the reservation price.

Risk Capital

The money provided by shareholders in exchange for an equity share in a company; it cannot be recovered if the firm goes bankrupt.