Economic model

The aim of the company in an open world and with the recognition of legitimate claims from external providers of resources is ultimately the appreciation that performance, created and established perspectives experience in the outside world. A look at the outside perspective shows how the evaluation process takes place there; the description is the market model.
However, the evaluation depends on mindsets, moods and coincidences that management cannot directly influence. The decision-making in the company must therefore be based on internal goals, sizes and key figures. The world that opens up here is that of the inner perspective.
The economic model is a representation of performance creation and performance evaluation that has three properties:

1. It belongs to the internal perspective, i.e. it relates to goals, sizes and key figures that can be influenced by management with its decisions

2. The economic model is analogous to the market model, so it is an internal replica of the external evaluation processes

3. The economic model shows how the goals, parameters and key figures used relate to the data that comes from accounting (accounting model).

The economic model is therefore a representation of value creation adapted to the inner world of the company. It is expressed in terms that have meaning within the company, are understood there and can be influenced. The increase in value calculated on the economic model should continue to be correlated with the market valuation over months and years, otherwise the economic model is not a transfer of the market valuation to the inner world. And thirdly, since accounting is important in companies, the economic model must show how the quantities used relate to those in accounting. The conversion of variables of the accounting model into those of the economic model is accomplished with so-called conversions.

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