Resource margin accounting: An elucidation and preliminary empirical testing

• Main Authors: JOHNSON, Peter, THOMAS, Howard
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2007
• Subjects: Cash flow; Economic value added; Resource management; Accounting; Strategic audit; resource margin accounting; Business; Strategic Management Policy
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/3947; https://doi.org/10.1108/00251740710745052
• Institution: Singapore Management University

The aim of this paper is to describe “resource margin accounting” (RMA) as a valuation framework in strategic analysis. The paper defines RMA as an improved framework for valuation in competitive strategy, relative to existing value-added and cash flow methods. The framework was tested on a sample of 300 US manufacturing companies between 1983 and 1998. The paper finds that the resource margin approach has greater explanatory power than traditional market-to-book valuation measures. The resource margin approach is methodologically and empirically superior to economic value-added (EVA) and cash flow models of valuation. The paper presents and tests a new valuation method: RMA.