9 - Thinking about critical issues

Abstract

Public misperceptions about firm performance and the market's valuation of it have enormous trouble-making potential in the national attitude about the role of government as overseer of business. Firms that regularly improve their core business processes usually also achieve improved financial performance as recorded in their accounting statements. A basic proposition of market economics is that society as a whole benefits as resources continually shift away from lower-valued uses and toward higher-valued uses as revealed in the ever-changing price structure of the market for goods and services. Successful managements often anticipate change or, at a minimum, recognize and adapt to it early. Managements that ignore change and conduct business as usual on the assumption that the future will mirror the past, are on a path of underperformance and wealth dissipation. An operating structure based on typical accounting ratios would attack the work-in-progress (WIP) inventory as excessively high and direct effort toward reducing it, if WIP were considered in isolation.