A Diagnostic Approach to Corporate Sustainability Based on Normalized Net Margins and Extended Present Value

Marco Desogus

First

;Elisa Casu

Second

2019-01-01

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Abstract

Relying on indices and ratios for rigorous deterministic valuations entirely, present analysis models often fail to clearly and logically represent diagnoses of companies and the outcomes of transactions conducted in risk capital markets, particularly banks, and other credit entities. Focusing on interactions between money, credit, production, and income mechanisms, we propose an alternate method for assessing businesses and determining their value at a certain time and the relative probability of insolvency. Replacing the static measures under which companies are normally evaluated, the method we propose outlines mathematical measures that normalize expected flows, positioning them against ‘extended present value’ to deepen the significance of income aspects to financial assessments.