The Potential Overreliance on Break-Even Analysis

The creation of value for shareholders, the central theme of contemporary financial theory, is generally regarded as the ultimate goal for management. The uncertain outlook for the remainder of this decade indicates that a management that does not concern itself with the creation of value for shareholders may be jeopardizing its own existence. The recent and continuing popularity of takeover activity, proxy fights, and existence of stock options suggests it is important for management to be cognizant of shareholders' desire for wealth.