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Many managers are confounded by the conflicting messages the market sends them. Strong improvements in the financial performance of a company can be followed by a sharp fall in the price of its shares. Results that moderately exceed consensus forecasts can propel its share price to new heights, leaving managers to wonder how they can possibly achieve the superhuman feats the market expects from them. Either way, they throw up their hands, rail at the …

…whether to own the assets it uses or to outsource its business functions. Finally, market value added (MVA), one more common corporate performance scorecard, represents TRS less a capital charge based on the cost of equity. But MVA does not distinguish between returns from improvements in short-term earnings and from long-term growth. Moreover, it doesn't remove the impact of financial market changes on TRS, so it cannot isolate returns resulting from changes in economic performance.