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Economic Analysis: Theory and Practice
 

Influence of the value-based management concept on reporting improvement, analysis and financial management development

Vol. 14, Iss. 8, FEBRUARY 2015

PDF  Article PDF Version

Available online: 15 February 2015

Subject Heading: Financial management

JEL Classification: 

Pages: 14-24

Kogdenko V.G. National Research Nuclear University MEPhI, Moscow, Russian Federation
kogdenko7@mail.ru

Importance The article discusses new trends in the modern finance related to the value-based management concept implementation.
     Objectives The objective of the paper is to study the influence of the value-based management concept on improving the reporting, developing procedures for financial and economic analysis, and new approaches to financial management.
     Methods The objective principles of the systems approach, using the ideas of economic analysis, logical and comprehensive approach to assessing economic phenomena and processes served as a methodological basis of the study.
     Results The article discusses the issues of formation and analysis of integrated reporting. I present the main changes in reporting, namely the inclusion of non-financial, estimated figures enabling to assess changes in company value. The article deals with the problem of accounting abuses and suggests assessing the quality of earnings and assets reported in financial statements. I consider the ways of improving the fundamental analysis, and present the key indicators of capital, profits, cash flows used therein. I also examine indicators for the analysis of six types of capital, i.e. industrial, financial, human, intellectual, social, and natural. I offer a method of fundamental analysis, which includes the analysis of three areas of decision-making: finance, investment, and operations, as well as the analysis of fundamental value and market capitalization. The article considers the modern concept of financial management, i.e. the value-based management, which implements the ideas of cost management as a basis for decisions to increase value. This paper analyzes the specifics of short-term and long-term financial policies focused on value maximization.
     Conclusions and Relevance I substantiate the main directions of economic analysis and financial management development in the context of implementing the value-based management concept. The article may be useful for financial service experts making financial decisions in the context of value-based management.

Keywords: integrated reporting, fundamental analysis, value-based management, short-term financial policy, long-term financial policy

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