Residual Income Valuation Model
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- Synopsis
- This note explains the residual income valuation model (RIM), how it relates to "traditional" valuation models, the intuition behind its use, and empirical research related to its value relevance. RIM is theoretically equivalent to the dividend discount model and the discounted free cash flow model. However, it expresses future cash flows to equity in terms of accounting measures of capital (e.g., book value of equity) and performance (e.g., return on equity). Implementing the RIM requires forecasting the amount of expected future "economic profits," which depends on how business strategy plays out in the context of industry competitive dynamics, effective management of financial capital, and governance.
- Copyright:
- 2022
Book Details
- Book Quality:
- Publisher Quality
- Publisher:
- Harvard Business Publishing
- Date of Addition:
- 02/02/22
- Copyrighted By:
- HBS
- Adult content:
- No
- Language:
- English
- Has Image Descriptions:
- No
- Categories:
- Nonfiction, Business and Finance
- Submitted By:
- Bookshare Staff
- Usage Restrictions:
- This is a copyrighted book.