Patent ID: 7412413

Claim:
A method of determining a measure of residual income in relation to a company or investment, comprising the steps of: providing in relation to a company or investment values of market capitalisation (MC) and of debt (VOD); determining the forecast earnings or cash flow stream (E) of the company or investment for at least one time period (t) in the future; deducting from the value of forecast earnings or cash flow stream (E) obtained a charge (CC) for the cost of capital employed; wherein the charge (CC) for the cost of capital employed is based upon a value of enterprise value (EV) and the cost of capital (i), the value of enterprise value (EV) being determined by adding the value of debt (VOD) and adjustments (ADJ), if any, to the current market capitalisation (MC) of the company or investment; and outputting a measure (EV+) of residual income (RI) dependent upon the resultant of the deducting step, where: EV+=E−CC.